Boeing to raise up to $19 bln to shore up finances, stave off downgrade
Offering includes 90 mln common stock, $5 bln convertible securities
Boeing shares down 2% premarket
Planemaker burning cash due to strike
S&P says stock offering 'favorable' for credit quality
Adds bullets, S&P comment in paragraph 5
By Utkarsh Shetti
Oct 28 (Reuters) -Boeing BA.N on Monday launched a stock offering that could raise up to $19 billion as the planemaker looks to strengthen its finances squeezed by an over month-long strike by its workers and preserve its investment-grade credit rating.
The company is offering 90 million in common stock and $5 billion in mandatory convertible securities.
Based on Friday's closing price, Boeing can raise $13.95 billion from the common stock offering, though such issues are typically priced at a discount to ensure enough demand.
The company's shares were last down 2% in premarket trading on Monday.
"The offering is certainly favorable for credit quality. We'll factor it into our assessment of the rating in the context of continued negative free cashflow," Ben Tsocanos, aerospace director at S&P Global Ratings, said.
A capital raise is essentially for Boeing to preserve its investment-grade credit rating. Rating agencies have warned that a prolonged strike may lead to a downgrade in the planemaker's credit rating, likely pushing up the cost of capital.
The move will boost Boeing's battered finances, which have worsened since roughly 33,000 of its workers represented by the machinists union walked off their jobs in September, halting production of models including its cash-cow 737 MAX aircraft.
The planemaker was already reeling under a regulator-imposed cap on production of its MAX jets after a January mid-air panel blowout.
The combination of labor woes and its production problems have caused it to burn cash in the last three quarters. Last week, the company reported a $6 billion third-quarter loss and said it would burn cash next year.
The same day, striking workers rebuffed an improved contract as it fell short of their demands of a 40% wage hike and restoration of a defined-benefit pension plan, which Boeing is unlikely to reinstate.
The strike is costing the company more than $1 billion per month, according to one estimate that was released before Boeing announced it would cut 10% of its workforce.
Earlier this month, Boeing entered into a $10 billion credit agreement with banks and announced plans to raise up to $25 billion through stock and debt offerings.
S&P Global has warned of a ratings downgrade if Boeing slipped below target cash balance of $10 billion or if the company had to increase leverage to meet debt maturities.
Boeing, which has never fallen below the investment-grade rating, had cash and marketable securities of $10.50 billion as of Sept. 30.
It has $11.5 billion of debt maturing through Feb. 1, 2026, and is committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems SPR.N and assume its debt.
Reuters had reported earlier this month Boeing was examining options to raise billions of dollars through a sale of stock and equity-like securities.
Boeing said on Monday it intends to use proceeds for general corporate purposes, which may include paying off debt.
Boeing's debt levels remain high https://reut.rs/3BOPkjh
Boeing Q3 2024 results: Share price movement in 2024 https://reut.rs/4e0dPaO
Writing by Abhijith Ganapavaram in Bengaluru; Editing by Sriraj Kalluvila
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
