Rolls-Royce plans to issue £2 billion in bonds to weather the coronavirus crisis
British aircraft engine manufacturer Rolle Royce plans to issue 2 billion pounds of debt to shareholders on Tuesday to raise the necessary funds to determine whether the company can survive the new crown epidemic.
The COVID-19 pandemic has caused widespread grounding of flights around the world, making airline activities almost stagnant, and affecting Rolls-Royce’s financial situation.
The company lost 5.4 billion pounds in the first half of 2020 and will face a cash crisis at the end of next year, when it will have to repay 3.2 billion pounds of debt.
In addition to providing Rolls-Royce with a £2 billion loan through the UK export financing agency in July, the British government also provided a £1 billion loan guarantee for the company to highlight the company The strategic importance of
Rolls-Royce accounts for 2% of all British exports and is one of the UK’s largest spenders on R&D. It also sources from 2,300 smaller British suppliers, and before the outbreak of the new crown, it provided up to 135,000 jobs in the UK.
However, the coronavirus pandemic has damaged Rolls-Royce’s financial situation because the airline can only pay the company when the flight is in normal flight, forcing it to seek £5 billion Debt and equity financing to weather the turbulence that may occur in the coming months.
The market value of Rolls-Royce has fallen from more than 20 billion pounds in 2018 to 4.7 billion pounds, which is comparable to British online retailers and private label ASOS.
Analysts are optimistic about Rolls-Royce’s future if it can ensure that it gets more than 50% of the votes at the virtual meeting on Tuesday.
If shareholders support the financing, including the issuance of £2 billion bonds, the company will have more debt options. Previously, strong investor demand allowed the company to double its expected goal.
Although the rights issue will greatly dilute shareholders’ equity, the investor advisory group said it is preferable to selling shares to sovereign wealth funds, because sovereign wealth funds will not give them the option to participate. Previously, media reports stated that Rolls-Royce was negotiating with sovereign wealth funds including the Singapore Government Investment Corporation to raise the necessary funds.
But continued travel restrictions mean that the outlook is bleak. According to data from the British industrial organization ADS, in the third quarter of this year, Rolls-Royce has only three orders for wide-body jets.
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