Rolls-Royce sells 94% of new shares as it raises £2bn to weather crisis

Tom Belger
·Finance and policy reporter
·3 min read
A Rolls-Royce Trent XWB aircraft engine is pictured at their booth at the ILA Berlin Air Show in Schoenefeld, Germany, May 31, 2016. REUTERS/Fabrizio Bensch/File Photo
Rolls-Royce announced the results of a rights issue. Photo: Fabrizio Bensch/Reuters

Plane engine-maker Rolls-Royce (RR.L) has sold 94% of new shares in a £2bn ($2.64bn) rights issue, as it battles to survive the crisis facing the global aviation industry.

The company is seeking to raise a total of £5bn to shore up its finances, as demand for its parts and servicing has plummeted amid an unprecedented collapse in air travel.

It said on Thursday it had sold the vast majority of new shares issued at a discount to shareholders over the past month before its 11 November deadline. They began trading on the London Stock Exchange on Monday.

Rolls-Royce’s underwriters, including Goldman Sachs (GS), HSBC (HSBA.L), Morgan Stanley (MS) and Jefferies (JEF), will now seek to sell the remaining shares. The rights issue is fully underwritten, meaning Rolls-Royce will raise approximately £2bn regardless of the proportion sold as they have underwriters’ guarantees to buy the rest if investors cannot be found.

The company has previously said its efforts to raise cash, which also include a bond offering and new loans, will ensure “improved financial resilience...in order to weather macro-economic risks.”

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Chief executive Warren East said when the recapitalisation plan was announced in October that its civil aerospace business had seen a “sharp deterioration” in financial performance. “We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position,” he told investors.

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The latest announcement comes only a week after the company re-opened its voluntary redundancy programme to applications from its entire UK civil aerospace workforce.

It confirmed last Thursday (5 November) it was looking to cut 950 jobs within its civil aerospace arm worldwide, and another 420 across its facilities teams.

Company chiefs hope more staff will volunteer to avoid compulsory layoffs. Rolls-Royce’s UK civil aerospace team make up around two-thirds of its entire UK headcount, according to PA.

The leading manufacturer of plane parts had announced in May it would axe 9,000 roles worldwide, including 3,000 roles in the UK. The latest cuts will fall within that tally as the company seeks to drastically rein in costs. More than 2,500 staff have already taken voluntary severance since the crisis began.

A Rolls-Royce spokesman told Yahoo Finance UK last week: “The global pandemic has hit our business hard. Although we have taken swift action and put many, often painful, mitigation plans in place, we must continue to further reduce our cost base so that we can safeguard the future of Rolls-Royce, return to break even and work towards our target of reaching positive cashflow in the second half of 2021.”

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