Rolls-Royce (RR.L) is considering raising £2.5bn ($3.2bn) from investors to shore up with balance sheet after the coronavirus crisis wreaked havoc on the global aviation industry.
The group is planning to launch the equity raise in the first few weeks of October, Rolls-Royce and the bankers are in talks with several sovereign wealth funds, including GIC — formerly known as Government of Singapore Investment Corporation, according to people familiar with the matter.
Rolls-Royce confirmed the discussion, saying it was reviewing all funding options.
"We continue to review all funding options to enhance balance sheet resilience and strength. Amongst other options, we are evaluating the merits of raising equity of up to £2.5bn, through a variety of structures including a rights issue and potentially other forms of equity issuance. Our review also includes new debt issuance," the company said.
It added that no final decisions have been taken "as to whether or when to proceed with any of these options or as to the precise amount that may be raised.”
In August, the firm which makes engines for planes, announced plans to close one of its UK factories in Annesley, Nottinghamshire, which will shut for good by 2023. The site makes components for its Trent and Pearl engines. Around 120 workers will be offered the chance to transfer to its bigger site in Derby, around 20 miles away.
The firm also announced plans to slash 9,000 jobs worldwide in May and all of its civil aerospace sites were put under review, as part of a drive to save £1.3bn a year.
Rolls-Royce said that it didn’t expect demand to return to pre-pandemic levels for five years, after the company has been heavily hit by the decline of air travel due to the pandemic.
It also plans to raise more than £2bn through selling divisions of the group, including its ITP Aero turbine-making business in Spain.
The company is considered to be a strategic interest in the UK, with the government owning a “golden share” in Rolls-Royce, which prevents it from coming under foreign control.