Rolls-Royce announces sale of assets to boost balance sheet

UK’s aero-engine maker will sell assets to try to raise at least $2.6 billion as it is hit by the COVID-19 pandemic and slump in travel

British aero-engine maker Rolls-Royce said it would sell assets to try to raise at least 2 billion pounds ($2.6 billion) as it battles to shore up a balance sheet ravaged by the COVID-19 pandemic and slump in travel.

Rolls-Royce plunged to a record loss before tax of 5.4 billion pounds ($7.14 billion) in the first half of 2020 and, compounding its woes, finance chief Stephen Daintith resigned, although said he would stay for a transition period.

The company said it would continue to look at options to bolster its finances even after asset sales. But asked about a possible rights issue, Daintith said Rolls-Royce had a good level of liquidity and a plan to cut costs.

“We’re not going to be drawn on any particular option for strengthening the balance sheet. We’re taking our time, considering carefully,” he told reporters on Thursday.

JP Morgan analysts said a rights issue was needed: “In our view only a very major capital raise would put Rolls-Royce on a sound footing.”

As the company is an important supplier to the UK government on military programmes, there has been media speculation that Britain could be forced to rescue it.

“Probably the most important thing that government can do is help get people flying again,” CEO Warren East said, when asked about potential state help.