Boeing's strike costs soar: Planemaker aims to raise $25 billion to shield balance sheet

Aerospace giant Boeing on Tuesday (October 15) announced plans to raise up to $25 billion to reinforce its finances as the struggling aerospace giant grapples with the financial impact of a prolonged strike that has halted production for a month.

In a regulatory filing, Boeing confirmed it had filed a “shelf registration” to secure potential equity funding, along with a separate new $10 billion credit agreement.

“This universal shelf registration provides flexibility for the company to seek a variety of capital options as needed to support the company’s balance sheet over a three-year period,” Boeing said in a statement, according to Bloomberg.

The new credit facility, which remains untapped, will provide “additional short-term access to liquidity as we navigate through a challenging environment,” Boeing noted. Shares of the company fluctuated in premarket trading, dipping 0.3 per cent as of early Tuesday.

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Boeing is working to avoid potential credit downgrades from Moody’s and S&P Global Ratings, both of which have warned of a possible downgrade to junk status in recent weeks. A downgrade would increase borrowing costs and make Boeing less attractive to some investment funds.

The ongoing strike by a machinists union in the Pacific Northwest, Boeing’s main production hub, is estimated to be costing the company over $1 billion per month, despite measures to cut costs. Boeing recently revealed it has minimal cash reserves beyond the $10 billion needed to sustain its investment-grade rating.

Other setbacks this year include production issues with the 737 Max and delays in its 777X program, Bloomberg reported.

As part of its capital strategy, Boeing has been exploring options for at least $10 billion in equity financing. Bankers have presented Boeing with various financial instruments, including preferred equity and convertible securities, which may count as equity under rating agency guidelines.

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The company, which currently carries $52 billion in long-term debt, is set to report third-quarter earnings on October 23, marking the first report under new CEO Kelly Ortberg.

Boeing has indicated it will take a $5 billion charge for its defense and space divisions and record additional costs for the 777X delay, pushing the aircraft’s launch back by six years.

Bank of America Securities, Citibank, Goldman Sachs Lending Partners, and JPMorgan Chase Bank are lead arrangers on the new credit facility, with Citibank serving as administrative agent.