In an attempt to rebuild its balance sheet, Rolls-Royce (LON: RR) has revealed plans to raise £2bn from shareholders.
The aircraft engine-maker will be raising a total of £5bn through shareholders, a £1bn bond offering, and £3bn worth of loans.
Rolls-Royce shares plummeted 8% on Thursday morning. They have fallen 80% since January as the group has been battered by the effects of the pandemic.
For the first half of the year, Rolls-Royce revealed a £5.4bn loss.
Shareholders will vote on the 27 October.
Warren East, the chief executive at Rolls-Royce, said in a statement: “We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position. The capital raise announced today improves our resilience to navigate the current uncertain operating environment.
“By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities.”
The company is offering shares at a discounted price. They are being sold at a 41% discount to Wednesday’s closing price of 130p per share.
On Rolls-Royce’s plan to raise money through shareholders, Susannah Streeter, a market analyst from Hargreaves Lansdown, said:
“Rolls-Royce reckons going cap in hand to shareholders to raise £2bn is the least worst option, to help it deal with the crushing impact the pandemic has inflicted on its core business. This should all give Rolls Royce a lot more room for manoeuvre to help it navigate the Covid crisis.”