Rolls-Royce's survival push takes wing

摘要

There are still four weeks until ROLLS-ROYCE completes its £5bn rescue recapitalisation, yet the resounding success of its high-yield bond last week and strong stock price performance show investors are optimistic about the aero-engine manufacturer's survival. Rolls-Royce's £2bn triple-tranche bond on Wednesday raised double the initial target across euros, sterling and US dollars while pricing 50bp inside price talk on all three tranches. A senior banker involved in the financing said the bond, even at the original deliberately cautious £lbn target, was significant in convincing the market that the fallen angel could access the bond market, thereby making the other components of the financing easier. "The confidence you build in one area of capital markets filters through to the others," the banker said. "Some don't think about the bond's impact on equity but the stock stops falling because the company has access to debt." When Rolls-Royce set out its plan at the start of October to raise £2bn through a rights issue and £2bn from loans plus the bond, its shares initially fell, but they have since rebounded strongly due to recovering confidence and considerable short covering. Shares fell from 130p to 113.6p in the two days after the plan was unveiled but nearly doubled the following week to a close of 223.2p on October 9. Shares closed on Thursday at 195.1p.