Boeing seeks up to $33b new equity for cash flow relief
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The news: Aerospace manufacturer Boeing launched a USD19 billion ($28.84 billion) equity and convertible securities offering to strengthen its balance sheet and avoid a potential credit downgrade.
The move follows a USD10 billion credit facility and is aimed at offsetting cash flow losses exacerbated by an ongoing seven-week union strike affecting production of Boeing’s 737 Max.
The numbers: The sale includes 90 million common shares valued at nearly USD14 billion and USD5 billion in mandatory convertible preferred stock.
If oversubscribed, Boeing could raise up to USD22 billion ($33.39 billion).
The offering is intended for "general corporate purposes," with PJT Partners as the adviser and major banks as underwriters.
Boeing's stock, which has lost 40% this year, was trading 1% lower in late morning trading.
The context: Boeing, grappling with years of turmoil and recent financial strains exacerbated by ongoing production issues and labour disputes, is now taking steps to – in its own words - "navigate through a challenging environment" and preserve its investment-grade credit rating, while burning cash due to the strike.
The company is facing a major cash-flow crunch due to the prolonged machinist strikes, with analysts estimating the cost of the strike at about USD1 billion per month.
Goldman Sachs, BofA, Citigroup and JPMorgan are acting as lead joint bookrunning managers for the offerings. Wells Fargo, BNP Paribas, Deutsche Bank, Mizuho, Morgan Stanley, RBC Capital Markets and SMBC Nikko are joint bookrunning managers.
The sources: Boeing statement , Bloomberg , FT , Reuters
