StockMarketWire.com - Rolls-Royce plans to raise approximately £2 billion through a fully underwritten 10 for 3 rights issue, it announced this morning.

The rights issue should improve liquidity and reduce balance sheet leverage, the company stated.

It also plans to raise a further £1 billion through through debt issuance "in the near future".

The company, which was hit hard by the collapse in air travel, has also agreed a new two-year loan facility of £1 billion conditional on the success of the rights issue.

It has also received an indication of support in principle from UK Export Finance for an extension of its 80% guarantee to support a potential increase of the company's existing £2 billion five-year loan of up to £1 billion.

The rights issue is subject to approval by shareholders at a general meeting scheduled for 27 October 2020.

Chief executive Warren East said: "The sudden and material effect of the COVID-19 pandemic has had a significant impact on the commercial aviation industry, resulting in a sharp deterioration in the financial performance of our civil aerospace business and, to a lesser extent, our power systems business.

"We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position." Story provided by StockMarketWire.com