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 over 2% at US$152.26 ($250.47) 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 hoped any equity issuance raised “would be closer to $15b and not $10b”, to limit the risk of Boeing having to tap shareholders again if the first issuance proved insufficient.
“From a position of negotiating strength, I’m not sure you necessarily need to [issue] the equity before the strike is settled,” the 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 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.
Rating agency S&P 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 US$10b in new equity to maintain its investment grade credit rating.
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 US$5b ($8.22b) of pre-tax charges.
It also announced another delay to its 777X jet to 2026. The company said it ended September with US$10.5b ($17.27b) in cash and marketable securities — close to the minimum it has said it needs to operate — after burning through US$1.3b ($2.14b)in cash during the third quarter.
Boeing had close to US$58bn ($95.41b)in consolidated debt at the end of the second quarter. It will report full results for the third quarter on October 23.
New chief executive Kelly Ortberg, who took the helm in August, told employees on Friday that “restoring our company requires tough decisions” as well as structural changes, to ensure that “we can stay competitive and deliver for our customers over the long term”.
(Air New Zealand has been hit by production delays at Boeing with delivery of the first of its next tranche of Dreamliners pushed out to late next year.)
Written by: Sylvia Pfeifer in London and Harriet Clarfelt in New York. Additional reporting by Jennifer Hughes
© Financial Times
