Boeing Shores Up Its Balance Sheet
Boeing Co is working with investment banks on a multibillion-dollar bond-fueled financing package. It aims to shore up its balance sheet amid a sharp travel downturn due to the coronavirus pandemic.
The preparations reflect the company’s confidence. It can tap the capital markets to strengthen its stocks and finances. This is while the largest U.S. planemaker is weighing up seeking government aid.
The airline has lined up investment banks to potentially market an offering to bond investors in the coming days. Provided that market conditions are favorable, adding the exact timing and size of the offering had not been decided.
The proceeds could amount to $10 billion or more, depending on investor demand. Boeing declined to comment. The company expects to elaborate on its funding options when it unveils its first-quarter earnings on Wednesday.
The planemaker has been trying to bring its 737 MAX jet back into service after two fatal crashes. This is happening even as the coronavirus pandemic is hammering the aviation industry.
Worldwide business shutdowns to survive through the outbreak have dried up demand for air travel, consequently affecting stock trading. The company has also considered applying to the U.S. Treasury Department for aid under a $17 billion program. This plan would be for companies that are critical to national security.
But its chief executive, David Calhoun, has been wary of the strings attached to such aid. Especially with the possibility that the company would have to give the government an equity stake.
Boeing Needs to Borrow More
The company is also examining funding support available to companies from the Federal Reserve. One of the Fed’s newly established programs, the Primary Market Corporate Credit Facility, will provide support to companies issuing bonds.
This is without placing any strict conditions on them, such as limits to dividend payouts or executive compensation.
Stock market reports said Boeing has stopped its share buyback program last year and has also suspended its dividend. Last month, the airline announced that Calhoun and board chairman Larry Kellner would forgo all pay until the end of 2020.
Calhoun told investors during the company’s annual shareholder meeting that it needs to borrow more over the next six months.
Credit ratings agency Moody’s Investors Service Inc estimated that the company’s funding needs could top $30 billion this year. The company secured about half of this by drawing down on a $13.8 billion credit line in March.
The 737 MAX jet will remain grounded at least until August as the manufacturer continues to grapple with software issues.
For the record, Boeing’s first-quarter deliveries were a third of the 149 seen a year earlier. It is the lowest figure since 1984 for the first quarter.
The Chicago-based company canceled a $4.2 billion deal for Embraer SA commercial aviation division over the weekend. This prompted the Brazilian company to initiate arbitration.
On Monday, Boeing unveiled new voluntary layoff offers to employees. Its spokesman Bernard Choi stated on Tuesday, that several thousand employees taking VLO or retiring is our expectation.
