Rolls-Royce Holdings plc said on Thursday it successfully priced an offering of three tranches of senior unsecured notes denominated in US dollars, euros and sterling to raise £2 billion. 

That was more than the £1 billion it was aiming for with the junk bond offering.

Rolls-Royce shares rose about 8%.

Bloomberg reported the bond sale came with much higher coupons than previous debt issues by Rolls-Royce, which lost its investment-grade status earlier this year.

The bond offering comprises:

·      $1 billion aggregate principal amount of 5.750% notes due 2027

·      €750 million aggregate principal amount of 4.625% notes due 2026 

·      £545 million aggregate principal amount of 5.750% notes due 2027

Rolls-Royce said on October 1 it would seek to raise up to £5 billion, including £2 billion from shareholders.

It said the COVID-19 pandemic had a “significant impact on the commercial aviation industry, resulting in a sharp deterioration” in the financial performance of its civil aerospace business and, to a lesser extent, its power systems business.

On Thursday, Rolls-Royce said in a stock exchange statement: “On 1 October 2020, we announced our intention to raise gross proceeds of at least £1 billion through a bond offering, as part of a proposed £5 billion recapitalisation package to increase resilience, strengthen the balance sheet and support long-term strategy.

“Given the strong demand from investors for the notes, we decided to increase the size of the offering of the notes issued to approximately £2 billion equivalent.

“The recapitalisation package also includes an approximately £2 billion fully underwritten rights issue and commitments for a new two-year term loan facility of £1 billion.

“The combination of the proceeds from the notes, the rights issue and the commitments for the new £1 billion term loan facility is expected to provide us with gross proceeds of approximately £5 billion.

“As previously announced on 1 October, we have also received support in principle from UK Export Finance for an extension of its 80% guarantee to support a potential increase of up to £1 billion to our existing £2 billion five-year term loan facility.

“However, given the increase in the quantum of notes being issued, we do not currently plan to progress this potential extension to our loan facility, while still having the option to do so at a later time if required.  

“The bond offering is expected to close on 21 October 2020 and the proceeds will be escrowed and will be available to Rolls-Royce upon successful completion of its rights issue.”

The bond offering comprises:

·      USD 1,000 million aggregate principal amount of 5.750% notes due 2027

·      EUR 750 million aggregate principal amount of 4.625% notes due 2026

·      GBP 545 million aggregate principal amount of 5.750% notes due 2027