EVERETT, US: Boeing filed papers with the US markets regulator on Tuesday for raising up to $25 billion through a stock and debt offering and entered into a $10 billion credit agreement amid a crippling strike and upcoming debt maturities. The planemaker is looking to shore up its finances that have been strained due to a slump in production of its best-selling 737 MAX jet following a mid-air door panel blowout earlier this year and a strike by thousands of union workers since Sept 13.
It was not clear when and how much Boeing will raise via the stock offering, but analysts estimate that Boeing would need to raise somewhere between $10 billion and $15 billion to be able to maintain its credit ratings, which are now just one notch above junk.
The planemaker’s shares were up 1 percent in premarket trading. Boeing said in a statement it had not drawn on the new $10 billion credit facility or its existing credit revolver. "These are two prudent steps to support the company’s access to liquidity,” Boeing said, adding that the credit agreement provides additional short term access to liquidity as it navigates through a "challenging environment”.
"This universal shelf registration provides flexibility for the company to seek a variety of capital options as needed to support the company’s balance sheet over a three year period,” Boeing said, referring to its filing with the US Securities and Exchange Commission. The company will use the funds for general corporate purposes, according to the filing. The planemaker had cash and cash equivalents of $10.89 billion as of June 30.
The strike is costing the company more than $1 billion per month, according to one estimate that was released before Boeing announced it will cut 17,000 jobs or 10 percent of its global workforce. The company and the Machinists union, which represents about 33,000 striking workers in the US Pacific Northwest, are yet to reach an agreement over a new contract and talks have become increasingly heated. US Acting Labor Secretary Julie Su met with Boeing and the union in Seattle on Monday in a bid to break the deadlock.
The planemaker was already reeling due to a regulator-imposed cap on production of its MAX jets after the mid-air cabin-panel blowout in January. Last month, Chief Financial Officer Brian West said at a Morgan Stanley conference that the company was "constantly evaluating our capital structure and liquidity levels to ensure that we could satisfy our debt maturities over the next 18 months while keeping confidence in our credit rating as investment grade.”
Boeing has $11.5 billion of debt maturing through Feb 1, 2026, and has committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems and assume its debt. Reuters reported earlier this month Boeing was examining options to raise billions of dollars through a sale of stock and equity-like securities. Boeing delivered 33 jets in September, down from 40 in August, as it slipped further in the delivery race with rival Airbus. – Reuters