Companies & Markets

Britain's Rolls-Royce raises £2b with rights issue

Published Thu, Nov 12, 2020 · 01:40 PM

[LONDON] British engineering company Rolls-Royce raised £2 billion(S$3.5 billion) from a rights issue on Thursday to bolster its pandemic-hit finances, after shareholders signed up for 94% of the new shares and the rest were sold via a rump placing.

Airlines pay Rolls-Royce based on how many hours its engines fly, so the company's finances have come under increasing pressure after Covid-19 stopped travel earlier this year.

The equity raise unlocks new debt options for the company including £2 billion from a bond issued in October and a bank loan worth £1 billion, as part of a total £5 billion liquidity package.

The overwhelming majority of shareholders backed the equity raise, but the results showed there were some dissenters to the issue from what is one of Britain's best known industrial names, with 6 per cent of the new shares issued not initially taken up.

The company said in a statement that 10 underwriting banks including Citigroup, Goldman Sachs and Morgan Stanley had successfully procured subscribers for the rest of the shares.

Chief executive Warren East Rolls-Royce can ride out Covid-19 with the new liquidity package and by cutting £1.3 billion in costs, axing 9,000 jobs and closing factories to adjust to lower demand from airline customers that fly with the firm's engines on Boeing 787s and Airbus 350s.