Boeing Seeks Financial Resilience Amidst Cash Burn Challenges
In a strategic move to bolster its financial position, Boeing (BA.N) has accessed the debt markets to secure a substantial $10 billion. This decision comes in the wake of a significant cash burn of $3.93 billion during the first quarter, as the aerospace giant grapples with slowed production rates of its flagship jet. Sources close to the matter have shed light on the company’s latest financial maneuvers.
The urgency of the situation was underscored by Boeing’s credit rating, which teetered precariously above “junk” status last week. The rating agencies’ response to a recent in-flight incident involving a 737 MAX 9 has added pressure on the company’s efforts to navigate through its current predicament.
Market watchers have anticipated Boeing’s potential move to engage with bond markets, aiming to strategically manage over $12 billion in debt obligations due in the mid-2020s. In response to this, credit rating agencies have assigned near-junk ratings to Boeing’s new senior unsecured notes, with S&P giving a BBB- rating and Moody’s a Baa3 rating. Despite these ratings, Moody’s acknowledged Boeing’s robust business profile, which could counterbalance the commercial aircraft division’s underperformance.
The proceeds from the bond issuance are earmarked for enhancing liquidity and addressing upcoming debt maturities, including a $4.3 billion tranche due in 2025. The market’s reception to Boeing’s bond offering appears positive, with reports indicating an eightfold oversubscription, signaling strong investor confidence.
The bond sale is being spearheaded by prominent financial institutions such as Bank of America, Citi, JPMorgan, and Wells Fargo. While Boeing has refrained from direct commentary on the matter, CFO Brian West emphasized during last week’s earnings call the company’s dedication to prudent balance sheet management. West reiterated Boeing’s commitment to maintaining its investment-grade rating and ensuring stability across its production and supply chain networks.
