Rolls-Royce preparing announcement on equity issuance

Rolls-Royce Holdings is poised to unveil a plan to seek financing from shareholders after ending talks to bring in sovereign wealth funds as co-investors, according to a person familiar with the matter.

The British maker of aircraft engines said last month it intends to raise as much as GBP2.5bn ($3.2bn) through a rights issue or other forms of equity, and also issue more debt. The company now plans to update the market on Thursday on its financing plans, the person said.

Shareholders of the UK engine-maker opposed a plan to raise funds from Singapore’s GIC and Kuwait Investment Office because it would dilute existing owners, the person added.

These talks were in early stages.

Sky News, which earlier reported the plan, said the financing would also include added borrowing.

Rolls on Wednesday declined further comment, referring to a September 25 statement: “We continue to review all funding options to enhance balance sheet resilience and strength. No final decisions have been taken.”

Rolls-Royce has lost more than 80 per cent of its value this year, touching a fresh 17-year low on Wednesday amid a broad industry downturn triggered by the coronavirus pandemic.

The company has been particularly hard hit by the decline in long-distance travel, which has sharply curtailed demand for the wide-body planes powered by its engines. Many aircraft in the existing fleet have been temporarily or permanently grounded, depriving Rolls-Royce of vital maintenance revenue it collects when they fly.

Rolls-Royce has also seen its debt downgraded to junk this year, meaning borrowing would come at a higher cost than before the pandemic.