Boeing seeks up to $35bn to bolster its balance sheet

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Boeing has announced plans to raise up to $25bn in new capital and agreed a $10bn credit facility, as the US plane maker seeks to shore up its balance sheet in the face of a crippling strike by its largest labour union.

In a filing, Boeing told investors it intended to raise up to $25bn in debt or equity, adding that this would provide “flexibility for the company to seek a variety of capital options as needed . . . over a three-year period”.

It has also struck a separate $10bn “supplemental credit agreement” with a consortium of lenders.

Boeing provided no details on precisely how much it intended to raise and when. It said it had not drawn on the new credit facility.

“These are two prudent steps to support the company’s access to liquidity,” the company said, adding that the credit agreement provided additional short-term access to liquidity as it navigated through a “challenging environment”.

Rating agency S&P Global Ratings last week warned of a possible downgrade of Boeing’s bonds to junk status, and analysts had said they expected the company to look to raise at least $10bn in new equity to maintain its investment-grade credit rating.

“They have bought themselves some time,” Ben Tsocanos, aerospace director at S&P, said on Tuesday. He added, however: “Ultimately the company has to resolve the strike and really be on a path to building planes again in order to maintain the rating.”

One bondholder said: “I think this is a smart strategy by management. They’re basically looking for a bridge facility just to give the market confidence that there aren’t any near-term concerns as they go through negotiations with the union.”

Rating agency Fitch said Boeing’s actions would “increase financial flexibility and moderate near-term liquidity concerns amidst an extended strike and continued operational challenges”.

Boeing shares were up just under 2 per cent at $151.92 in afternoon trading in New York after initially falling when markets opened.

Some analysts, however, were not convinced. Nick Cunningham at Agency Partners, said the vagueness and breadth of the filing and the need for the temporary financing implied “that the banks are struggling to sell this issue to potential investors or lenders”.

A second bondholder said they hoped that any equity issuance raised “would be closer to $15bn and not $10bn”, to limit the risk of Boeing having to tap shareholders again if the first issuance proved insufficient.

The fundraising plan comes as Boeing struggles to deal with the impact of a strike by its largest union that has halted production at factories in Washington state, threatening a possible credit downgrade.

The industrial action by 33,000 members of the International Association of Machinists and Aerospace Workers, which began on September 13, has stopped manufacturing lines of most of its planes, including its best-selling 737 Max.

“From a position of negotiating strength, I’m not sure you necessarily need to [issue] the equity before the strike is settled,” the second bondholder added. “You don’t want to necessarily say to the union ‘I have great liquidity, let’s keep on going forever on this one’.”

A third bondholder noted that they did not know how long the strike would continue, saying: “The problem with these supply chains is once you turn them off, it’s pretty hard to turn them back on, so we don’t know how much cash they need, and nor do they.”

The group has been grappling with problems since a door panel blew off one of its 737 Max aircraft in mid-flight at the start of January. Regulators demanded that the company slow production of the best-selling jet as part of a wider effort to improve quality and safety.

Boeing on Friday announced it would cut 17,000 jobs from its operations to stem losses, as it booked about $5bn of pre-tax charges.

It also announced another delay to its 777X jet to 2026. The company said it ended September with $10.5bn in cash and marketable securities — close to the minimum it has said it needs to operate — after burning through $1.3bn in cash during the third quarter.

Boeing had close to $58bn in consolidated debt at the end of the second quarter.

It will report full results for the third quarter on October 23.

Kelly Ortberg, who became Boeing’s chief executive in August, told employees on Friday that “restoring our company requires tough decisions” and structural changes, to ensure that “we can stay competitive and deliver for our customers over the long term”.

Additional reporting by Jennifer Hughes