Rolls-Royce (RYCEF) is in discussions with sovereign wealth funds, including Singapore’s GIC, as part of its efforts to raise around £2.5B from investors next month, according to three people with direct knowledge of the matter, says the Financial Times.
According to the publisher’s sources, Rolls Royce is working with Goldman Sachs to launch the equity raise in early October and is in talks with multiple sovereign wealth funds including GIC.
In a statement, Rolls-Royce addressed the recent media speculation, telling investors that it continues to review a range of funding options to further strengthen its balance sheet. These could include debt and equity but no final decisions have been taken, said the company.
“We have already taken swift action to strengthen our liquidity with £6.1bn at the end of the first half of the year and a further £2bn term loan agreed in the second half” stated Rolls-Royce, adding that it has also announced £1bn of cost mitigation activity in 2020 and launched a reorganization of our Civil Aerospace business to save £1.3bn annually.
“We have also identified a number of potential disposals that are expected to generate proceeds of more than £2bn over the next 18 months, including ITP Aero” the company said.
A further announcement will be made if and when appropriate, Rolls-Royce concluded. (See Rolls-Royce stock analysis on TipRanks)
Shares in the company have plunged over 70% year-to-date, and the stock scores a cautious Hold consensus from the Street. Meanwhile, with shares so low, the average analyst price target indicates significant upside potential lies ahead.
However, Berenberg’s Andrew Gollan has just upgraded the company from Hold to Buy, explaining that its current valuation is unjustified as it fails to account for any recovery potential from ‘rock-bottom’. The analyst added that the share price implies negative value for Rolls-Royce’s civil-aerospace unit.