By Shankar Ramakrishnan, Allison Lampert, Echo Wang and Mike Stone
NEW YORK (Reuters) – Boeing is inspecting choices to lift billions of {dollars} by way of a sale of inventory and equity-like securities, two sources acquainted with the matter mentioned, because the planemaker tries to keep away from slipping in to junk territory on its credit score scores.
Up to now few weeks, Boeing has obtained pitches from funding banks, together with Goldman Sachs, JPMorgan, Financial institution of America and Citigroup, suggesting numerous fundraising choices, based on 4 sources acquainted with the matter.
These choices embrace promoting widespread inventory in addition to securities akin to necessary convertible bonds and most well-liked fairness, based on the sources. One of many sources mentioned they prompt to Boeing that it ought to increase round $10 billion.
Such hybrid bonds will be handled as fairness capital by ranking businesses, which implies issuing them wouldn’t add to debt to the identical extent as promoting bonds, whereas additionally being doubtlessly extra favorable for current shareholders.
Banks have additionally been constructing so-called shadow books, sounding out curiosity from traders for such securities in case Boeing determined to go forward, the sources mentioned. Some traders have reached out to banks to inform them they had been occupied with buying Boeing’s most well-liked securities in the event that they had been issued, two of the sources mentioned.
Boeing and the funding banks declined to remark. The sources, who requested anonymity as these conversations are non-public, mentioned Boeing had not determined whether or not to go forward with any of those choices. It was not clear when it’d decide.
Final month, Boeing CFO Brian West instructed a Morgan Stanley convention that the corporate was “continuously evaluating our capital construction and liquidity ranges to make sure that we might fulfill our debt maturities over the following 18 months whereas conserving confidence in our credit standing as funding grade.”
Sustaining an funding grade ranking is essential for the planemaker, which has by no means fallen beneath that threshold. Rankings cannot solely decide the price of capital for an organization, however additionally they give it entry to steady institutional investor cash.
Boeing’s funds have come underneath strain since a Jan. 5 incident during which a door panel blew off a 737 MAX jet mannequin in mid-air led to slumping manufacturing of the jet. Then final month its staff went on strike, additional hitting manufacturing and leaving it burning by way of money.
The corporate has about $60 billion in debt and posted working money circulation losses of greater than $7 billion for the primary half of 2024.
Analysts estimate that Boeing would wish to lift someplace between $10 billion and $15 billion to have the ability to keep its scores, which are actually only one notch above junk.
Late final month, Moody’s mentioned the corporate had upcoming commitments of $16 billion, and {that a} downgrade was potential if it deemed any fairness increase was insufficient relative to that. The corporate has $11.5 billion of debt maturing by way of Feb. 1, 2026, and is dedicated to issuing $4.7 billion of its shares to amass Spirit AeroSystems and assume its debt.
Moody’s, which has Boeing’s Baa3 ranking on evaluate for a downgrade to junk, declined to offer extra particulars.
Creditsights analyst Matt Woodruff estimated the corporate wants to lift $12 billion to $15 billion to maintain Moody’s from chopping its scores into junk, particularly if the strike extends into this complete month.
It isn’t clear, nevertheless, whether or not any of the fundraising choices that contain elevating money by way of devices apart from widespread inventory would fulfill credit score businesses.
S&P World Rankings aerospace director Ben Tsocanos instructed Reuters that issuing widespread fairness could be higher from a credit score standpoint.
“We’d view most well-liked inventory that had a required fee as extra debt-like and fewer supportive of the ranking,” he mentioned.
S&P mentioned on Tuesday it positioned Boeing’s ranking on CreditWatch destructive, saying the planemaker will possible require incremental funding.
(Reporting by Allison Lampert in Montreal, Shankar Ramakrishnan and Echo Wang in New York and Mike Stone in Washington; Modifying by Paritosh Bansal and Matthew Lewis)
