Rolls Royce shares are tumbling after announcing plans for another cash raise to shore up their beleaguered finances as the shares trade at a 17-year low. The company announced plans to raise 2 billion pounds in new debt and also tap current shareholders for a further £2 billion in an equity raise. A trio of banks are said to be working on the £1 billion bond, alongside a new term-loan of the same amount.
The latest deals put Rolls Royce debt at £16 billion as the company seeks to weather the storm in the aviation industry caused by the coronavirus restrictions inflicted on the industry. Rolls Royce has seen flying hours for its engines decimated and its revenues have suffered accordingly. The latest £2 billion debt offering is among the biggest junk bond deals created by a European issuer this year. The company had issued a public statement on September 25th after talk of a fund raising swirled in the market.
Rolls Royce saw a record pre-tax loss of £5.4bn for the first half of 2020 and the company’s CEO had warned that they would be exploring other avenues to boost the company’s balance sheet. The company plans to slash its global workforce by a fifth, whilst the company will reduce the number of production sites it has worldwide from 11 to six.
A trans-Tasman air travel bubble is finally being prepared with flights between Australia and New Zealand as early as November. This is a glimmer of hope for the airline industry but Europe is still seeing a rise in virus cases and travel restrictions still exist between European countries, with the U.K. adding Poland and Turkey to its list of corridor countries.
Rolls Royce shares are in freefall from the latest cash raise and the stock is heading for a test of the 100p level. The next support level below there is at 65.00p. The stock will need to find a base and show a buy signal before it’s worth buying. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
