Boeing launches funding round to stave off credit downgrade
(2024/10/28)
- Reference: 1730127608
- News link: https://www.theregister.co.uk/2024/10/28/boeing_launches_funding_round_to/
- Source link:
updated Beleaguered Boeing is hoping millions of new shares and billions of dollars in convertible securities can stave off a credit downgrade as it leaks cash during an ongoing strike.
The aerospace biz today [1]announced plans to sell 90 million new shares and $5 billion in depositary shares that will mature into common stock in 2027. Based on stock prices at last week's close, 90 million new shares could net Boeing around $14 billion, meaning the company could stand to make around $19 billion if everything goes well - and it desperately needs that cash right now.
According to Boeing's financial results for Q3 ended 30 September, the corporation [2]lost $6.1 billion as its troubles continue to mount following a door plug blowout earlier this year that appears to have been the last straw for many investors and [3]employees .
[4]
Those troubles have been exacerbated most recently by a [5]30,000-employee strike among members of the International Association of Machinists and Aerospace Workers that began last month - on earnings day of all days - and is ongoing after workers [6]rejected the latest contract offer.
[7]
[8]
Fitch Ratings, one of the top three bond credit agencies, alongside Moody's and Standard & Poor's, [9]said on the first day of the strike that Boeing's "investment-grade credit rating has limited headroom for a strike" which would put the company at risk of a downgrade if it carried on for more than a couple of weeks.
"If the current strike lasts a week or two, it is unlikely to pressure the rating," Fitch said. "However, an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade."
[10]
Here we are, smack dab in the middle of extended strike territory.
"Our ratings case forecasts do not assume an operationally disruptive labor action but do account for union-linked labor cost increases under new contracts," Fitch added.
Boeing has blamed the strike for its dismal quarter – so yeah, it's definitely disrupting operations at this point.
[11]Boeing again delays the 777X – the plane that's supposed to turn things around
[12]Report slams Boeing and NASA over shoddy quality that's delayed SLS blastoff
[13]What was Boeing through their heads? Emails show staff wouldn't put their families on a 737 Max over safety fears
[14]Boeing's Starliner proves better at torching cash than reaching orbit
Moody's has placed Boeing on review for a possible downgrade to junk status, and S&P has placed Boeing on a watch list as well, both firms [15]said earlier this month. S&P [16]reportedly said it would downgrade Boeing if the company's cash balance slipped below $10 billion, and that red line is close: Boeing said in its Q3 statement that it had $10.5 billion cash on hand, down $2.1 billion from the previous quarter.
Boeing is also carrying debt of around $58 billion which may grow once it completes the [17]reacquisition of supplier Spirit . Fitch has said Boeing needs to get its gross debt below $50B by the end of 2026 for it to reconsider downgrading the company.
[18]
To stave off that downgrade, all three firms reckon Boeing needs to raise cash, and that's just what the company is doing with this latest move. Boeing said it intends to use funds raised, in part, to repay its debts.
Whether the matter will appease shareholders and credit agencies in unclear, however, Boeing shares have tipped downward slightly in pre-market trading since the funding round was announced. ®
Updated to add at 1515 UTC on October 28 2024
In a press release today, Fitch [19]said Boeing's new equity offer alleviates its risk of being downgraded - for now, at least.
"Fitch continues to evaluate the company's ability to resolve its labor negotiations, regain operational momentum, and adhere to our negative rating sensitivity," the credit agency said.
Get our [20]Tech Resources
[1] https://boeing.mediaroom.com/2024-10-28-Boeing-Announces-Launch-of-Concurrent-Offerings-of-Common-Stock-and-Depositary-Shares
[2] https://www.theregister.com/2024/10/23/boeing_q3/
[3] https://www.theregister.com/2024/04/24/boeing_whistleblower_q1_2024/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://www.theregister.com/2024/09/13/boeing_hit_by_strike_action/
[6] https://www.theregister.com/2024/09/13/boeing_hit_by_strike_action/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.fitchratings.com/research/corporate-finance/prolonged-boeing-strike-could-pose-downgrade-risk-13-09-2024
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://www.theregister.com/2024/10/14/boeing_layoffs_delays/
[12] https://www.theregister.com/2024/08/09/nasa_boeing_sls/
[13] https://www.theregister.com/2020/01/11/boeing_737_max_emails/
[14] https://www.theregister.com/2024/08/02/boeing_starliner_losses/
[15] https://www.reuters.com/business/aerospace-defense/boeing-weighs-options-raising-cash-ratings-downgrade-looms-sources-say-2024-10-08/
[16] https://www.reuters.com/business/aerospace-defense/boeing-launches-offering-90-mln-common-shares-5-bln-depositary-shares-2024-10-28/
[17] https://www.theregister.com/2024/07/01/boeing_reacquires_spirit/
[18] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[19] https://www.fitchratings.com/research/corporate-finance/boeing-equity-raise-supports-liquidity-alleviates-downgrade-risk-28-10-2024
[20] https://whitepapers.theregister.com/
The aerospace biz today [1]announced plans to sell 90 million new shares and $5 billion in depositary shares that will mature into common stock in 2027. Based on stock prices at last week's close, 90 million new shares could net Boeing around $14 billion, meaning the company could stand to make around $19 billion if everything goes well - and it desperately needs that cash right now.
According to Boeing's financial results for Q3 ended 30 September, the corporation [2]lost $6.1 billion as its troubles continue to mount following a door plug blowout earlier this year that appears to have been the last straw for many investors and [3]employees .
[4]
Those troubles have been exacerbated most recently by a [5]30,000-employee strike among members of the International Association of Machinists and Aerospace Workers that began last month - on earnings day of all days - and is ongoing after workers [6]rejected the latest contract offer.
[7]
[8]
Fitch Ratings, one of the top three bond credit agencies, alongside Moody's and Standard & Poor's, [9]said on the first day of the strike that Boeing's "investment-grade credit rating has limited headroom for a strike" which would put the company at risk of a downgrade if it carried on for more than a couple of weeks.
"If the current strike lasts a week or two, it is unlikely to pressure the rating," Fitch said. "However, an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade."
[10]
Here we are, smack dab in the middle of extended strike territory.
"Our ratings case forecasts do not assume an operationally disruptive labor action but do account for union-linked labor cost increases under new contracts," Fitch added.
Boeing has blamed the strike for its dismal quarter – so yeah, it's definitely disrupting operations at this point.
[11]Boeing again delays the 777X – the plane that's supposed to turn things around
[12]Report slams Boeing and NASA over shoddy quality that's delayed SLS blastoff
[13]What was Boeing through their heads? Emails show staff wouldn't put their families on a 737 Max over safety fears
[14]Boeing's Starliner proves better at torching cash than reaching orbit
Moody's has placed Boeing on review for a possible downgrade to junk status, and S&P has placed Boeing on a watch list as well, both firms [15]said earlier this month. S&P [16]reportedly said it would downgrade Boeing if the company's cash balance slipped below $10 billion, and that red line is close: Boeing said in its Q3 statement that it had $10.5 billion cash on hand, down $2.1 billion from the previous quarter.
Boeing is also carrying debt of around $58 billion which may grow once it completes the [17]reacquisition of supplier Spirit . Fitch has said Boeing needs to get its gross debt below $50B by the end of 2026 for it to reconsider downgrading the company.
[18]
To stave off that downgrade, all three firms reckon Boeing needs to raise cash, and that's just what the company is doing with this latest move. Boeing said it intends to use funds raised, in part, to repay its debts.
Whether the matter will appease shareholders and credit agencies in unclear, however, Boeing shares have tipped downward slightly in pre-market trading since the funding round was announced. ®
Updated to add at 1515 UTC on October 28 2024
In a press release today, Fitch [19]said Boeing's new equity offer alleviates its risk of being downgraded - for now, at least.
"Fitch continues to evaluate the company's ability to resolve its labor negotiations, regain operational momentum, and adhere to our negative rating sensitivity," the credit agency said.
Get our [20]Tech Resources
[1] https://boeing.mediaroom.com/2024-10-28-Boeing-Announces-Launch-of-Concurrent-Offerings-of-Common-Stock-and-Depositary-Shares
[2] https://www.theregister.com/2024/10/23/boeing_q3/
[3] https://www.theregister.com/2024/04/24/boeing_whistleblower_q1_2024/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://www.theregister.com/2024/09/13/boeing_hit_by_strike_action/
[6] https://www.theregister.com/2024/09/13/boeing_hit_by_strike_action/
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.fitchratings.com/research/corporate-finance/prolonged-boeing-strike-could-pose-downgrade-risk-13-09-2024
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://www.theregister.com/2024/10/14/boeing_layoffs_delays/
[12] https://www.theregister.com/2024/08/09/nasa_boeing_sls/
[13] https://www.theregister.com/2020/01/11/boeing_737_max_emails/
[14] https://www.theregister.com/2024/08/02/boeing_starliner_losses/
[15] https://www.reuters.com/business/aerospace-defense/boeing-weighs-options-raising-cash-ratings-downgrade-looms-sources-say-2024-10-08/
[16] https://www.reuters.com/business/aerospace-defense/boeing-launches-offering-90-mln-common-shares-5-bln-depositary-shares-2024-10-28/
[17] https://www.theregister.com/2024/07/01/boeing_reacquires_spirit/
[18] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zx_DNxeb0I4Tip_FruA20gAAABA&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[19] https://www.fitchratings.com/research/corporate-finance/boeing-equity-raise-supports-liquidity-alleviates-downgrade-risk-28-10-2024
[20] https://whitepapers.theregister.com/
Re: And still...
Yet Another Anonymous coward
They have stopped going to Starbucks and eating Avacado toast
Doctor Syntax
Wow. Only last week I expressed the thought that that might be a tad embarrassing.
bazza
Yep. Only a few years ago they were busily engaging in stock buy backs. The irony...
It's a text book example of a management mortagaging the future to enrich the shareholders today including themselves.
Anonymous Coward
Oh.
Dear.
How.
Sad.
Never.
Mind.
Funding round ? For Boeing ?
Pascal Monett
HA HA HA HA HA HA HAAAAA !
You'd have to be daft to throw money into that company. Might as well use it to light your barbecue.
Re: Funding round ? For Boeing ?
tony72
I guess the counterargument would be that it's a too-big-to-fail company, and it's shares are probably pretty cheap right now. I'm certainly not tempted myself though.
Re: Funding round ? For Boeing ?
bazza
They're not too big to fail. Arguably, they already have failed in that they're not a profitable, healthy company operating in a way that is useful to the US gov and beneficial to the US economy. They're dragging lots of other companies down with them whilst they fail too - suppliers, airlines, all over the world.
And the way things are going, there won't be anything left to save.
Awaiting decision
Vulch
Other than switching the provisional first operational Starliner flight to SpaceX, NASA has yet to announce what work will be needed to get Starliner certified. They may well require another test flight, probably uncrewed, although it may be part funded as a cargo run. It's another looming hole in Boeing's finances.
And still...
Boeing does nothing about their apparently inadequate Board, their incompetent management and, better yet, stonewalled their own shareholders at the last shareholder meeting including calls to move back to Seattle.
Playing musical deckchairs on the Titanic, McBoeing-Douglass Boeing keeps their C-suite bonus plan blinders on tightly.