LONDON (Reuters) – Rolls-Royce said on Thursday it wanted to raise a total of five billion pounds, including two billion (5.46 billion euros) from its shareholders, to strengthen its balance sheet as the coronavirus crisis hits hard the air transport sector of which he is a supplier.
The British engine manufacturer, who is paid according to the number of flight hours flown by airlines using its engine, has seen its share price collapse by 80% this year, the result of a drastic drop in long-haul traffic following the health crisis.
On the London Stock Exchange, the Rolls-Royce share fell Thursday 9.8% to 117.18 pence late in the morning.
Rolls-Royce, whose engines power the Boeing 787s and Airbus 350s, announced in May its intention to cut 9,000 jobs and a close scrutiny of its finances.
"The capital increase announced today strengthens our resilience to navigate the current uncertain operating environment," said Rolls-Royce Managing Director Warren East.
"This is a comprehensive plan that will avoid any liquidity issue during this crisis," he told reporters. "We wanted this plan to provide sufficient leeway, even in the worst-case scenario."
NO STATE AID
A capital increase was publicly among the options considered since July. Concerns over Rolls-Royce's financial health had fueled speculation about a British state bailout of the engine manufacturer, which had been nationalized in 1971 before being privatized.
The group's chief financial officer, Stephen Daintith, ruled out any public financial support on Thursday. "It's not part of our plan," he said.
The British group, which has consumed four billion pounds of cash this year, said it expects to return to positive cash flow in the second half of 2021 and is targeting 750 million pounds of free cash flow in 2022.
Rolls-Royce has however indicated that this objective will depend on the resumption of long-haul traffic. As Europe faces a resurgence of the coronavirus epidemic, airlines believe that it will be necessary to wait until 2024 to return to the level of traffic of 2019.
Rolls-Royce, whose market capitalization fell to just 2.5 billion pounds, launched a capital increase at a price of 32 pence per share, a 41% discount from the theoretical ex-right price of 54, 6 pence calculated by analysts.
The transaction will be submitted to shareholders for approval at the general meeting on October 27.
Britain's export credit agency UK Export Finance has said it is ready to back an extension of its guarantee to 80% of the current five-year £ 2 billion loan to Rolls-Royce. The agency is also ready to support an increase in the loan to an amount of up to £ 1 billion.
Rolls-Royce also said it has commitments for a new two-year credit facility in the amount of £ 1 billion.
(French version Claude Chendjou, edited by Blandine Hénault)