Rolls-Royce Holdings Plc announced plans to raise 2 billion pounds ($2.6 billion) in new debt, joining the list of the biggest sub-investment grade deals in Europe this year.
BNP Paribas SA, Citigroup Inc. and HSBC Holdings Plc are the banks coordinating Rolls Royce’s 1 billion pound-equivalent bond offering as well as a new term-loan facility of the same amount, according to people familiar with the matter, who asked not to be named discussing private information. The company will also tap existing shareholders for 2 billion pounds in a rights issue.
Rolls Royce is seeking to shore up capital amid the brutal impact of the Covid-19 pandemic on the aerospace industry. The 2 billion-pound debt offering puts the jet-engine maker among the biggest junk-rated deals done by an European issuer this year. Other names in that list include Thyssenkrupp Elevators, Virgin Media-O2, Masmovil and Stonegate, all of whom raised debt for M&A purposes.
The bond offering will be denominated in U.S. dollars, euros and pounds, while the company has already agreed commitments for the new two-year term loan facility. Rolls Royce will also tap existing shareholders for 2 billion pounds in a rights issue.
The fundraising, which would boost Rolls-Royce’s total debt to almost 16 billion pounds, is aimed at seeing the company through to 2022, when it expects to resume cash generation.
While the launch of the loan is expected on Thursday, the timing of the bonds is still to be determined, the people said.
The company’s 550 million-euro ($646 million) senior unsecured notes due 2028 rose as much as 3 cents on the euro on Thursday to 84 cents, the most since they were issued in 2018, according to data compiled by Bloomberg.
Although Rolls Royce lost its investment-grade rating earlier this year due to the disruption the pandemic has caused in the airspace industry, the bond offering is likely to attract interest from investors with an investment grade focus.