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Rolls-Royce in £189m asset sale to boost balance sheet

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Rolls-Royce's business aviation engine, the Pearl 700
Image source: Rolls-Royce plc

On Monday, Rolls-Royce (LSE: RR) announced the sale of its 23.1% stake in AirTanker Holdings Limited. The sale, to Equitix Investment Management Limited, should generate £189m in cash. The deal should complete in the first quarter of 2022. Rolls-Royce says it will use the cash to reduce net debt.

AirTanker Holdings operates aircraft used to support air-to-air refuelling, air transport and other services for the Ministry of Defence. The planes are powered by Trent 772B engines, which Rolls will continue to service and maintain.

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Tom Bell, President Rolls-Royce Defence, described the sale as “another important step towards achieving our group target to generate at least £2bn from disposals, as announced last year, to help rebuild our group balance sheet in support of our medium-term ambition to return to an investment grade credit profile.”

The latest move comes after a previous sale, announced by Rolls-Royce in August. The firm agreed to sell its Bergen Engines fuel business to Langley Holdings for €63m. At the time, Rolls also told us it was in discussions to sell its ITP Aero business.

Rolls-Royce debt

At 30 June, Rolls had net debt on the books of £3,083m (excluding lease liabilities). That was an almost doubling from the £1,533m figure at 31 December 2020, after the company reported free cash outflow of £1,151m in the half.

At interim time, Rolls-Royce said it expects “to turn free cash flow positive sometime during the second half of this year“, adding that it hoped to stem total free cash outflow for the year at around £2bn. That’s less than half the firm’s 2020 outflow of £4.2bn.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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