Rolls-Royce has confirmed it is looking to raise £3billion in a bid to boost its finances following a “sharp deterioration” in its civil aerospace business during the pandemic.
The company will tap investors for £2billion through a rights issue and another £1billion through a bond offering.
The announcement comes after weeks of speculation that Rolls-Royce, which has its civil aerospace divisions in Filton, near Bristol, and Derby, was seeking to raise funds.
Rolls-Royce also said UK Export Finance - the government’s trade finance body - had indicated it would, in principle, support an extension of the company’s existing £2billion loan - up to £1billion.
It said this was subject to completion of the rights issue, agreement of terms with lenders and approval of terms by UK Export Finance and HM Treasury.
“There is therefore no guarantee that this increase will take place,” it said.
The aerospace giant has been hit hard by the fall in demand for air travel since the outbreak of Covid-19.
In August, the company announced it had dropped to an eye-watering £5.4 billion half-year pre-tax loss .
Warren East, chief executive of Rolls-Royce, said: “The sudden and material effect of the Covid-19 pandemic has had a significant impact on the commercial aviation industry, resulting in a sharp deterioration in the financial performance of our civil aerospace business and, to a lesser extent, our power systems business.
“We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position.
“The capital raise announced today improves our resilience to navigate the current uncertain operating environment.
“By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities.”
