Boeing has lined up investment banks to potentially market an offering to bond investors in the coming days, provided that market Exclusive: Boeing eyes major bond issue to raise funds Home Boeing's capital raise, first reported by Reuters earlier this week, is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data. Notes due next year are trading close to par.The debt offering enables Boeing to avoid any strings attached from federal aid, such as compensation limits and an equity stake for the government. Boeing has a market capitalization, i.e., equity value of about $75 billion and debt of about $40 billion before the bond issue. But some of the company’s suppliers may still need help.“We believe that government support will be critical to ensuring our industry’s access to liquidity,” Boeing Chief Executive Officer Dave Calhoun said Wednesday.Those initial risk premiums are more in line with junk-rated companies, and will “get the greed juices flowing,” said David Knutson, head of credit research for the Americas at Schroder Investment Management, said earlier Thursday.“It is almost paradoxical that companies with little to no income or a very hazy outlook would have substantial access to capital markets,” he said.
Boeing eyes major bond issue to raise funds The preparations reflect Boeing's confidence that it can tap the capital markets to strengthen its finances Boeing included a provision in its bond sale that Fitch rated the new bonds BBB, though the rater doesn’t expect global aviation markets to return to 2019 levels until 2022, and in some cases 2023, analysts Craig Fraser and Nicholas Varone said in a Boeing burned through $4.7 billion of cash in the first quarter, which could quadruple by year-end and continue into 2021 as the pandemic and global recession sap demand for plane sales, Barclays analyst David Strauss said in a note to clients Thursday.Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. managed the sale, the person said. Boeing had to offer sharply higher interest rates than past debt issuances – one 10-year tranche yields 5.15%, according to Reuters.
bond deal is being marketed in seven parts, with portions due in three, five, seven, 10, 20, 30 and 40 years. Boeing was already hurting from the grounding of the 737 Max before the Covid-19 outbreak, but it’s looking to shore up liquidity even further by cutting jobs and production.The debt offering caps off another The extra liquidity provides “solid upside” to Boeing’s stock, Bernstein analysts led by Douglas Harned said in a report Thursday. Boeing sold $3.5 billion of bonds, providing a liquidity boost as it faces at least $1 billion of costs related to its 737 MAX airplanes. Workers wearing protective masks stand at an entrance to a Boeing production plant to hand out masks Boeing sold $25 billion in bonds to investors Thursday, a massive offering that allows the company to avoid taking aid from the federal government and giving Washington equity and a say in its business. Oracle Corp. was said initially Boeing is betting its balance sheet strength and access to capital will see it through the current crisis. That’s sour news for shareholders, meaning no return soon to the generous dividends and buybacks the company lavished on investors over the past two decades, and debt service threatens to further crowd out strategic investments.“This does not bode well for Boeing’s long-term product positioning,” Stallard writes, and its balance sheet weakness could impact customer and supplier confidence.Boeing may use the proceeds of the debt issuance in a way that further raises its financial risks, warns analyst Richard Aboulafia of Teal Group, internally financing jetliner orders for customers and allowing it to maintain a higher rate of production than the market justifies. Wed, Apr 29, 2020 - 11:44 AM. I help direct our coverage of autos, energy and manufacturing, and write about aerospace and defense. Send tips to jbogaisky[at]forbes.com But the debt comes with considerable costs.Boeing had to offer sharply higher interest rates than past debt issuances – one 10-year tranche yields 5.15%, according to “Boeing is now arguably owned by the banks,” Stallard wrote in a client note.
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