Rolls-Royce to raise billions in emergency plan to survive pandemic
The shares tumble to a 17-year low as the jet-engine maker seeks to shore up capital
London — Rolls-Royce announced plans on Thursday to raise £2bn in new debt, joining the list of the biggest sub-investment grade deals in Europe in 2020.
BNP Paribas, Citigroup and HSBC are the banks co-ordinating Rolls-Royce’s £1bn-equivalent bond offering as well as a new term-loan facility of the same amount, according to people familiar with the matter, who asked not to be named discussing private information. The company will also tap existing shareholders for £2bn in a rights issue.
The shares tumbled to a 17-year low, at one point they were down at 112.55p, the lowest since 2003. They ended the day down 10.2%, at 117p.
Rolls-Royce is seeking to shore up capital amid the brutal impact of the Covid-19 pandemic on the aerospace industry. The £2bn debt offering puts the jet-engine maker among the biggest junk-rated deals done by an European issuer in 2020. Other names in that list include Thyssenkrupp Elevators, Virgin Media-O2, Masmovil and Stonegate, all of which raised debt for mergers and acquisitions purposes.
The bond offering will be denominated in US dollars, euros and pounds, while the company has already agreed commitments for the new two-year term loan facility. Rolls-Royce will also tap existing shareholders for £2bn in a rights issue.
The fundraising, which would boost Rolls-Royce’s total debt to almost £16bn, is aimed at seeing the company through to 2022, when it expects to resume cash generation.
While the launch of the loan was expected on Thursday, the timing of the bonds was still to be determined, the people said.
The company’s £550m senior unsecured notes due 2028 rose as much as 3c on the euro on Thursday to 84c, the most since they were issued in 2018, according to data compiled by Bloomberg.
Although Rolls-Royce lost its investment-grade rating earlier in 2020 due to the disruption the pandemic has caused in the airspace industry, the bond offering is likely to attract interest from investors with an investment grade focus.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.