Rolls-Royce Gets Shareholder Backing for $2.6 Billion Fund Raise

A Rolls-Royce Trent 1000 aircraft engine, produced by Rolls-Royce Holdings Plc, stands on display during the Microsoft Corp. Future Decoded Conference at the ExCel London conference center in London, U.K., on Tuesday, Nov. 1, 2016. Businesses and homes are increasingly vulnerable to cyber attacks as people install Internet-connected appliances and companies rely on outdated systems, U.K. Chancellor of the Exchequer Philip Hammond warned. Photographer: Simon Dawson/Bloomberg , Bloomberg

Charlotte Ryan, Bloomberg News

Oct 27, 2020

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(Bloomberg) -- Rolls-Royce Holdings Plc shareholders backed a 2 billion-pound ($2.6 billion) equity raise, a key step toward shoring up its finances as the British engine maker struggles through the Covid-19 pandemic.

Investors voted to approve the rights issue ahead of a meeting on Tuesday, heeding the company’s call for help, Chairman Ian Davies said. The support of shareholders means Rolls-Royce can access a further 3 billion pounds of funds, through a bond offer and a 1 billion-pound term loan, both of which were conditional on the rights issue passing.

Rolls-Royce’s engine business has been dealt a heavy blow by the coronavirus, with both unit sales and maintenance revenue hurt by a mass grounding of widebody planes. The company announced a 5 billion-pound refinancing plan at the start of this month, funded through a combination of debt issuance, a rights offer and loans.

The package is aimed at seeing Rolls-Royce through to 2022, when the company expects to resume generating cash alongside a gradual recovery in demand for air travel. Chief Executive Officer Warren East has also said the company could sell assets as it repositions for the future.

Uphill Road

Even with funding secured, Rolls-Royce still faces an uphill road to recovery. The twin-aisle planes the company supplies are predicted to take until at least 2025 to recover to pre-pandemic levels and the group has announced plans to cut 9,000 jobs.

Rolls-Royce recently updated civil aerospace staff on the restructuring, a company spokeswoman said Tuesday. Plans include the temporary shuttering of factories, reducing working hours and cutting benefits, according to the Financial Times.

The British engine maker is paying the price for a strategy decided before the crisis, which was to only make engines for larger twin-aisle aircraft that have been hit hardest by travel restrictions to contain the virus. East has said that he doesn’t see any opportunities for new engine programs this decade, though Rolls-Royce has expressed interest in providing for a new, midrange jetliner if Boeing Co. decides to move forward with the concept, according to people familiar with the matter.

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