SUPERNEWS

Macro

Boeing to Issue Bonds Amid $3.9B Cash Burn, Credit Downgrade

Boeing enters bond market post-$3.9B cash burn, Moody's downgrades to near-junk, aims to diversify debt and ensure liquidity.

By Max Weldon

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4/29, 09:14 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Boeing Company
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Key Takeaway

  • Boeing plans its first bond sale after a quarterly loss and $3.9 billion cash burn, with maturities up to 40 years.
  • Moody's cut Boeing's credit rating to one step above junk, reflecting heightened financial risk.
  • Despite the downgrade, Boeing CFO emphasizes the company's intent to maintain its investment-grade rating and access to $10 billion in credit lines.

Boeing's Bond Market Maneuver

Boeing Co. is venturing into the bond market with a multi-part sale, marking its first foray into debt issuance following a challenging quarter. The aerospace giant reported a significant quarterly loss alongside a cash burn amounting to $3.9 billion. This financial strain comes in the wake of Moody’s Ratings downgrading Boeing’s credit rating to just a notch above junk status. The planned bond sale spans maturities from three to 40 years, indicating Boeing's strategy to diversify its debt profile and manage liquidity concerns over both the short and long term. The longest, a 40-year bond, is expected to yield approximately 2.65 percentage points above the benchmark Treasuries, highlighting the risk premium investors demand for Boeing's longer-term debt instruments.

Moody’s Outlook and Rating Concerns

The outlook for Boeing, as per Moody’s, remains negative, reflecting ongoing challenges and uncertainties facing the company. This sentiment is echoed across the board, with all three major credit rating agencies positioning Boeing at the brink of high-yield territory, commonly referred to as "junk" status. Such a classification could significantly impact Boeing’s borrowing costs and its ability to raise funds in the future. The downgrade underscores the financial hurdles Boeing faces, amidst efforts to stabilize its operations and financial health.

Boeing’s Financial Strategy and Liquidity

In response to the downgrade and the current financial predicament, Boeing's Chief Financial Officer, Brian West, emphasized the company's commitment to maintaining its investment-grade rating during a recent conference call. West highlighted Boeing’s proactive measures to safeguard its liquidity, including $10 billion in untapped credit lines that the company has yet to draw upon. This approach signifies Boeing’s cautious yet strategic financial management, aiming to ensure sufficient liquidity while navigating through its recovery phase. West’s remarks underscore a confidence in Boeing’s ability to access capital markets for additional liquidity, if necessary, signaling to investors and stakeholders about the company’s resilience and strategic foresight in managing its financial challenges.

Management Quotes

  • Brian West, CFO of Boeing:

    "He intends to protect the company’s investment-grade rating, and that the company still has access to $10 billion in untapped credit lines... Boeing is monitoring its access to cash and believes it still has ‘significant market access’ if it needs to supplement liquidity."