Aircraft engine manufacturer Rolls-Royce has revealed plans to raise up to £5bn to bolster its balance sheet.

According to Rolls-Royce, gross proceeds of around £2bn will be secured by way of proposed fully underwritten ten for three Rights Issue of up to 6,436,651,043 new ordinary shares at 32p for each new ordinary share.

The company also said that the Financial Conduct Authority has approved the combined prospectus and circular in relation to the Rights Issue.

Additionally, the company will raise at least £1bn via a bond offering that is expected to start in the near future. It has also agreed on commitments for a new two-year term loan facility of £1bn.

Rolls-Royce has obtained a support indication in principle from UK Export Finance for an extension of its 80% guarantee.

This will aid in a potential increase of the company’s existing £2bn five-year term loan of up to £1bn.

Rolls-Royce chief executive Warren East said: “We are undertaking decisive and transformative action to fundamentally restructure our operations, materially reduce our cost base and improve our financial position.

“The capital raise announced today improves our resilience to navigate the current uncertain operating environment.

“By raising additional capital now, we will improve our liquidity headroom and reduce our level of balance sheet leverage, while supporting disciplined execution and investment to ensure we maximise value from our existing capabilities.

“The strength of our people, brand and global footprint, together with our innovation and technology will support us as we emerge from the Covid-19 pandemic and implement our longer-term strategy, playing a crucial role in the world’s transition towards a net-zero carbon economy.”

In August, the company unveiled plans to sell ITP Aero and other assets to raise at least £2bn.