Boeing to raise as much as $25bn in bid to boost liquidity

According to a regulatory firm the company submitted a shelf registration, laying the groundwork for a potential equity offering.

Boeing Co. plans to raise as much as $25 billion as the beleaguered planemaker seeks to shore up its balance sheet and withstand a prolonged strike that has devastated production for a month.

The company filed a so-called shelf as a precursor to a possible equity increase, according to a regulatory filing on Tuesday. Boeing separately said that it has a new credit agreement in place for $10 billion.

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“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.

Boeing said that the credit facility provides “additional short term access to liquidity as we navigate through a challenging environment.” The company has not drawn on this facility or its existing credit revolver, it said.

Boeing shares whipsawed in premarket US trading, and were down 0.3% as of 6:53 am in New York.

The manufacturer is working to stave off potential ratings downgrades from Moody’s Ratings and S&P Global Ratings, which have both said within the last five weeks that they might cut Boeing’s credit grades to junk status, steps that would boost the company’s interest costs almost instantly and make Boeing a less attractive investment for some funds.

Boeing revealed late last week that it has only a small buffer on top of the $10 billion of cash and short-term securities that it needs to avoid slipping to junk status. The strike by members of a machinist union in the Pacific Northwest, a crucial hub of Boeing aircraft production, is costing the company more than $1 billion a month even after cost-saving moves, according to an estimate from S&P last week.

The strike is just one of a series of mishaps for a company that has been suffering all year. In January, a freak accident blew a door-size hole into the fuselage of an airborne 737 Max, forcing the company to slow production to fix problems with its manufacturing process. The stock is heading for its worst annual performance since the 2008 financial crisis, and Boeing said last week that it plans to cut 10% of its workforce, equivalent to about 17 000 people.

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Bloomberg reported in early October that Boeing was looking at raising at least $10 billion of equity, and was talking with advisers to explore options. Reuters reported last week that banks have pitched the company a series of possible instruments, including preferred equity and mandatory convertible securities, that are treated as equity-like by ratings firms.

The planemaker has said that avoiding junk status is a key ambition. The company would be the biggest US corporate borrower to ever be stripped of its investment-grade ratings and join junk bond indexes in the case of a downgrade, flooding the high-yield market with a record volume of new debt to absorb.

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Downgrades to junk from two of Boeing’s three major credit graders would leave much of its $52 billion of outstanding long-term debt ineligible for inclusion in investment-grade indexes.

Boeing is due to report earnings on 23 October, the first time that new chief executive officer Kelly Ortberg presides over the release.  Boeing will record $5 billion in combined charges for its two largest businesses when it formally reports the numbers, the company said Friday evening in a surprise announcement.

Besides the defense and space charges, Boeing will book additional costs for pushing back its 777X model once more, leaving its largest widebody aircraft with a delay of about six years.

BofA Securities Inc., Citibank, Goldman Sachs Lending Partners and JPMorgan Chase Bank acted as joint lead arrangers and joint book managers on the new loan. Citibank is administrative agent and BofA, Goldman and JPMorgan were co-syndication agents.

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