 "Boeing seeks to raise up to $19 billion to shore up finances amid strike challenges")
Boeing on Monday launched a stock offering that could raise up to $19 billion as the planemaker looks to strengthen its finances squeezed by an over month-long strike by its workers and preserve its investment-grade credit rating.
Boeing is seeking to bolster its financial position by offering $90 million in common stock and $5 billion in mandatory convertible securities. Based on Friday’s closing stock price, the common stock offering could potentially raise around $13.95 billion, although such issues are usually priced at a discount to attract investors.
The company’s shares saw a slight decline during volatile premarket trading on Monday. This capital raise comes as Boeing grapples with significant financial challenges exacerbated by a recent strike involving approximately 33,000 workers from the machinists union, which halted production of key models, including the 737 MAX.
The planemaker was already reeling under a regulator-imposed cap on production of its MAX jets after a January mid-air panel blowout.
The combination of labour woes and its production problems have caused it to burn cash in the last three quarters. Last week, the company reported a $6 billion third-quarter loss and said it would burn cash next year.
The same day, striking workers rebuffed an improved contract as it fell short of their demands of a 40% wage hike and restoration of a defined-benefit pension plan, which Boeing is unlikely to reinstate.
Impact Shorts
More ShortsA capital raise is essentially for the company to preserve its investment-grade credit rating. Rating agencies have warned that a prolonged strike may lead to a downgrade in Boeing’s credit rating, likely pushing up the cost of capital.
The strike is costing the company more than $1 billion per month, according to one estimate that was released before Boeing announced it would cut 10% of its workforce.
Earlier this month, Boeing entered into a $10 billion credit agreement with banks and announced plans to raise up to $25 billion through stock and debt offerings.
S&P Global has warned of a ratings downgrade if Boeing slipped below target cash balance of $10 billion or if the company had to increase leverage to meet debt maturities.
Boeing, which has never fallen below the investment-grade rating, had cash and marketable securities of $10.50 billion as of Sept. 30.
It has $11.5 billion of debt maturing through Feb. 1, 2026, and is committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems and assume its debt.
Reuters had reported earlier this month Boeing was examining options to raise billions of dollars through a sale of stock and equity-like securities.
Boeing said on Monday it intends to use proceeds for general corporate purposes, which may include paying off debt.
With inputs from agencies.
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