Rolls-Royce explores options to raise funds amid downturn

Bloomberg

Rolls-Royce Holdings Plc, the British jet-engine maker, is exploring options to raise funds that would help fortify the company against a downturn in the aerospace industry.
The London-based company is in the early stages of reviewing a range of options to strengthen its balance sheet, it said in
a statement, confirming a Bloomberg News report.
“No decisions have been made,” Rolls-Royce said. “Our current financial position and liquidity remain strong.”
Rolls-Royce is examining possibilities including selling shares and divesting assets, people familiar with the matter said, asking not to be identified because the information is private. Its ITP Aero unit is one potential disposal being studied, the people said. The company could seek about $1.9 billion to 2 billion pounds if it decides to proceed with an equity offering, the people said. It hasn’t discussed precise figures and details could change, they said.
The UK company makes engines for wide-body aircraft, leaving it particularly exposed to fallout from the coronavirus pandemic that’s roiled global travel. While Rolls-Royce has no immediate liquidity issue, the long-haul aircraft market it serves isn’t expected to rebound until at least 2023, according to the International Air Transport Association. Shares of Rolls-Royce extended losses after the Bloomberg report, falling as much as 12%.
About half of Rolls-Royce’s revenue comes from its civil aerospace business, according to data compiled by Bloomberg. The grim outlook for industry led S&P Global Ratings to downgrade Rolls-Royce’s credit rating to junk at the end of May, a move which can raise a company’s borrowing costs and lock out certain lenders.
The company had 7.4 billion pounds of available liquidity as of June, including 300 million pounds from the UK’s Covid Corporate Financing Facility and a 1.9 billion-pound revolving credit facility.
Still, its cash receipts for the first half are likely to be significantly lower than normal, as the engine flying hours that traditionally bring in maintenance revenue dropped because of the pandemic. Rolls-Royce would join discount carrier EasyJet Plc, publisher Informa Plc and online grocer Ocado Group Plc in seeking to sell new stock during the crisis.