LONDON: Shares in Rolls-Royce sunk to their lowest level since 2004 after the British aero-engine company confirmed it was considering a rights issue of up to 2.5 billion pounds ($3.23 billion), following months of speculation about its finances.

The company, Britain's best known engineering name, put out a statement on Saturday in response to media stories, confirming the amount of new equity it could look to raise.

The COVID-19 pandemic has blown a major hole in its balance sheet as airlines pay the company according to how many hours its engines fly, pushing it into a record loss of 5.4 billion pounds in the first half of 2020.

Shares in Rolls-Royce traded down 10pc to 161 pence at 0750 GMT.

They have lost 76pc of their value in the year to date.

The company has a plan to sell assets to try to raise at least 2 billion pounds and said it is also looking at new debt options.