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Boeing has announced plans to raise about $19bn, as it seeks to bolster its balance sheet and avoid having its investment-grade credit rating potentially cut to junk.
The announcement comes barely a fortnight after it revealed its intention to raise up to $25bn in new capital and agreed a $10bn credit facility, in an effort to shore up finances that have been further strained by its largest labour union going on strike.
Boeing said on Monday it would sell 90mn common shares, which total just under $14bn based on the stock’s Friday closing price of $155.01. It also plans to sell $5bn of other securities that would convert into preferred shares. The group did not say how much it hoped to raise in total from the offering, but the money would be used for “for general corporate purposes”.
With the capital raise, Boeing is taking another step to address a crisis that has been building for five years. Fatal plane crashes and a worldwide grounding of the 737 Max were followed by the Covid-19 pandemic, which prompted the company to raise $25bn in debt.
The company had $10.5bn in cash and marketable securities at the end of September, a little more than what it needs to operate the business. Chief financial officer Brian West said last week that Boeing would burn cash not only in 2024, but also 2025.
Boeing has used $10bn in cash during the first nine months of this year. It started by slowing manufacturing in the first quarter to improve quality, after a door panel blew off a jet mid-flight.
In September, production in Washington stopped completely as 33,000 members of the International Association of Machinists and Aerospace Workers District 751 walked off the job as they sought to improve pay and benefits. The machinists rejected Boeing’s latest offer on Wednesday, dealing a blow to chief executive Kelly Ortberg.
West has said since the summer that the company would prioritise its investment-grade credit rating. The company reported $58bn in debt at the end of the third quarter, and all three credit rating agencies have rated it one notch above junk.
The rate at which Boeing delivers commercial jets is critical to the company’s rating.
Siddhartha Sandilya, Jefferies’ managing director for industrial equities, said the capital raise has “been a key focus in all our ‘what to do’ conversations” prior to Boeing’s recent third-quarter earnings report, and it “will be able to be priced fairly tight given how well-anticipated it will have been and given our view of appetite”.
The company’s share price was down 1.8 per cent shortly after Wall Street’s opening bell on Monday.
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