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Exclusive: Boeing eyes major bond issue to raise funds

Stock MarketsApr 29, 2020 08:05AM ET
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© Reuters. FILE PHOTO: The Boeing logo is pictured at the LABACE fair in Sao Paulo

By Greg Roumeliotis and Mike Spector

(Reuters) - Boeing (NYSE:BA) Co is working with investment banks on a multibillion-dollar bond-fueled financing package as it aims to shore up its balance sheet amid a sharp travel downturn due to the coronavirus pandemic, three people familiar with the matter said on Tuesday.

The preparations reflect Boeing's confidence it can tap the capital markets to strengthen its finances, even as the largest U.S. planemaker weighs seeking government aid.

Boeing has lined up investment banks to potentially market an offering to bond investors in the coming days, provided that market conditions are favorable, the sources said, adding the exact timing and size of the offering had not been decided.

The proceeds could amount to $10 billion or more, depending on investor demand, one of the sources added. The sources asked not to be identified because the matter is confidential. Boeing declined to comment. The company is expected to elaborate on its funding options when it unveils its first-quarter earnings on Wednesday.

The planemaker has been trying to bring its 737 MAX jet back into service after two fatal crashes, even as the aviation industry has been hammered by the coronavirus pandemic. Widespread business shutdowns around the world to curb the outbreak have dried up demand for air travel. Boeing has also considered applying to the U.S. Treasury Department for aid under a $17 billion program for companies that are critical to national security, according to the sources. But Boeing's chief executive, David Calhoun, has been wary of the strings attached to such aid, especially the possibility that the company would have to give the government an equity stake.

The company is also examining funding support available to companies from the Federal Reserve, one of the sources said. One of Federal Reserve's newly established programs, the Primary Market Corporate Credit Facility, will provide support to companies issuing bonds without placing any strict conditions on them, such as limits to dividend payouts or executive compensation.

Boeing stopped its share buyback program last year and has also suspended its dividend. Last month, Boeing announced that Calhoun and board chairman Larry Kellner would forgo all pay until the end of the year.

Calhoun told investors during the company's annual shareholder meeting on Monday that the company would need to borrow more over the next six months.

Credit ratings agency Moody's (NYSE:MCO) Investors Service Inc estimated this month that Boeing's funding needs could top $30 billion in 2020. The company secured about half of this by drawing down on a $13.8 billion credit line in March, Moody's said.

The 737 MAX jet is expected to remain grounded at least until August, as the manufacturer continues to grapple with software issues, people briefed on the matter told Reuters on Tuesday.

Boeing's first-quarter deliveries were a third of the 149 seen a year earlier and the lowest since 1984 for the first quarter.

The Chicago-based company canceled a $4.2 billion deal for Embraer SA (NYSE:ERJ)'s commercial aviation division over the weekend, prompting the Brazilian company to initiate arbitration.

On Monday, Boeing unveiled new voluntary layoff offers (VLOs) to employees. Boeing spokesman Bernard Choi said on Tuesday "several thousand employees taking VLO or retiring is our expectation."

Exclusive: Boeing eyes major bond issue to raise funds
 

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Comments (3)
Jason Zou
Jason Zou Apr 29, 2020 3:11AM ET
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“Market an offering to bond investors” sounds condescending, while actually they are begging for money to weather their double crises, i.e. pandemic impact and 737 Max debacle.
david oNG
david oNG Apr 29, 2020 3:11AM ET
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you provide a good point.
David Knight
David Knight Apr 29, 2020 12:43AM ET
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us gov will purchase 50% and banks 50% with gov stimulus.
嘉偉 吳
嘉偉 吳 Apr 29, 2020 12:20AM ET
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Who want to buy?
 
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