MARKET REPORT: Rolls-Royce shareholders back British engineer’s £2bn cash call, throwing it a lifeline as its tries to survive coronavirus crisis
Rolls-Royce shareholders have backed the British engineer’s £2bn cash call, throwing it a lifeline as its tries to survive the Covid crisis.
The emergency fundraising – through the sale of new shares – will allow the jet engine maker to unlock a wider support package worth £5billion in total.
This includes £2billion of bonds that will be sold on the debt market and another £1bn through refinancing with its banks.
It gives Rolls vital breathing room after the pandemic caused demand for aircraft to collapse, hammering the engineering firm’s main source of income.
But Rolls, which slumped to a £5.4billion half-year loss in August, is still struggling to cut costs and faces its first industrial action in 41 years over plans to move several hundred jobs to Singapore.
Issuing new shares has been one of the company’s main strategies to raise cash quickly, with investors able to buy ten new shares for every three they already owned under the rights issue. The new shares were on sale for 32p each – a discount of more than a third on their usual price.
Chairman Ian Davis said the plan had been ‘passed overwhelmingly’ at a one-off meeting yesterday, with virtually all votes cast – or 99.5 per cent – in favour.
But despite the respite, Rolls shares closed down 3.1 per cent, or 7.1p, at 219p on a generally gloomy day for stocks.
London’s FTSE 100 index struggled to stay above water, falling 1.1 per cent, or 63.02 points, to 5728.99 – its second red day in a row.
Among the top fallers were asset managers that tend to track global markets, with M&G down by 7.5 per cent, or 12.4p, to 153.85p and rival Legal & General down 5.1 per cent, or 9.95p, to 185.65p.
Other stocks whose fortunes are largely tied to the economy also suffered, with advertising agency WPP, falling 5.1 per cent, or 33.4p, to 625.2p, and housebuilder Persimmon, down 5.5 per cent, or 137p, to 2378p.
The FTSE 250 index of mid-sized companies joined the downward march too, falling 1.5pc, or 265.59 points, to 17587.71.
Easyjet shares dropped 3 per cent, or 15.6p, to 504p, after it raised £307m by selling aircraft as it battles to survive the pandemic.
The airline sold five of Airbus’s best-selling A320 aircraft to Irish-based Wilmington Trust SP Services. And it offloaded another four of the same aircraft to Sky High 112 Leasing Company.
Easyjet has arranged leaseback agreements with both groups – meaning it can still use the planes even though it will not own them.
Spread betting firm Plus 500, which has enjoyed a bumper year thanks to wild swings in stock markets, saw its shares plunge despite posting blowout third-quarter results.
The company revealed that revenues nearly doubled to £166m during the three months to September 29 when compared to a year ago, while profits similarly leapt from £54m to £103m.
However, the growth was slower than the second quarter’s, with bosses warning that this ‘gradual reduction’ had continued into the fourth quarter as well.
It sent shares falling 8.2 per cent, or 132.5p, to 1488.5p – although shareholders are still sitting on paper gains of more than 70 per cent so far this year.
Revolution Bars, a business hit hard by pandemic restrictions, fell 2.5 per cent, or 0.25p, to 9.65p as it pushed forward with plans to shut venues and seek lower rents.
The embattled chain is set to close six venues, resulting in 130 job losses, under a proposed company voluntary arrangement that must be approved by creditors.
It is also seeking better terms on seven others, including short-term relief from rent payments.