16 October 2020 by jbchevrel
Rolls-Royce Plc (RR) is a UK-based engineering company focused on power and propulsion systems. RR segments include Civil Aerospace, Defence Aerospace and Power Systems. RR has been struggling this year due to the collapse in the number of hours flown by its wide-body and long-haul aircraft engines. This is the source of more than 50% of their Civil Aerospace segment revenue. This metric fell -75% in Q2 and -50% in H1. Yesterday, RR announced it was issuing £2b of 6y and 7y bonds, paying coupons of up to 5.75%. RR needs cash now and will have racked up close to £3.5b in net debt by the end of this year, most of which fall due now or in 2021. RR will have burnt roughly -£4b cash in full year 2020, and analysts expect negative cash flow of -£1b in 2021. Issuing stock, issuing bonds, and the 2y facility total £5b plus £2b potential asset sale (Spanish parts maker ITP Aero). That should be enough liquidity for them to operate over the next 1 year. 1-year CDS has been stable at about 200bp.