Sky News has learned that the Kuwait Investment Office (KIO), part of the Gulf State investment vehicle, is negotiating a deal in a potential £ 2.5 billion cash call.
Sources said on Friday that Rolls-Royce was in talks with the KIO – a London branch of the Kuwait Investment Authority – and Singapore’s Government Investment Corporation (GIC).
GIC’s interest was reported last week by the Financial Times.
In total, £ 500million of new shares has been awarded to sovereign investors, meaning the two SWFs could acquire stakes worth £ 250million each, the sources added.
Rolls-Royce, the maker of aircraft engines, has seen its track record hit by the coronavirus pandemic and has been forced to cut thousands of jobs as it braces for a prolonged drop in customer demand of aviation.
The company, led by chief executive Warren East, plans to launch a rights issue to raise up to £ 2.5 billion as of October 1, insiders said.
A Rolls-Royce spokesperson said: “We continue to explore all financing options to improve resilience and balance sheet strength.
“Among other options, we are assessing the merits of raising equity capital up to £ 2.5bn, through various structures, including a rights issue and potentially other forms of equity issuance. .
“No final decision has been made as to whether or when to proceed with any of these options or as to the precise amount that can be raised. ”
The magnitude of the fall in Rolls-Royce’s share price – its valuation fell by more than 80% last year – means a £ 2.5bn fundraising appeal would imply the company increases almost all of its market capitalization by issuing new shares.