Boeing is weighing cash-raising options as ratings loom, sources told Reuters

By Shankar Ramakrishnan, Allison Lampert, Echo Wang and Mike Stone

NEW YORK (Reuters) – Boeing ( NYSE: ) is examining options to raise billions of dollars through a sale of stock and equity-like securities, two sources familiar with the matter said, as the planemaker tries to avoid a slide in unwanted territory. its credit ratings.

In the past few weeks, Boeing has received proposals from investment banks, including Goldman Sachs, JPMorgan, Bank of America and Citigroup, suggesting various fundraising options, according to four sources familiar with the matter.

Those options include selling common stock as well as securities such as mandatory convertible bonds and preferred stock, according to the sources. One of the sources said he suggested Boeing raise about $10 billion.

Such hybrid bonds may be treated as equity by the rating agencies, meaning that their issuance would not contribute to debt to the same extent as a bond sale, while potentially being more favorable to existing shareholders.

Banks have also built so-called shadow books, showing investor interest in such securities should Boeing decide to move forward, the sources said. Some investors have contacted banks to say they are interested in buying Boeing’s preferred bonds if they are issued, two of the sources said.

Boeing and the investment banks declined to comment. The sources, who spoke on condition of anonymity because these conversations are private, said Boeing has not decided whether to move forward with either option. It was unclear when he might make a decision.

Last month, Boeing CFO Brian West told a Morgan Stanley conference that the company is “constantly evaluating our capital structure and liquidity levels to ensure we can meet our debt maturities over the next 18 months while maintaining confidence in our investment grade credit rating. “

Maintaining an investment grade rating is crucial for the planemaker, which has never fallen below that threshold. Valuations can not only determine the cost of capital for a company, but also give it access to stable institutional investor money.

Boeing’s finances have been under pressure since a Jan. 5 incident in which a door panel exploded mid-air on a 737 MAX jetliner led to a drop in production of the plane. Then, last month, its workers went on strike, further hitting production and leaving it burning through cash.

The company has about $60 billion in debt and posted operating cash flow losses of more than $7 billion for the first half of 2024.

Analysts estimate Boeing would need to raise somewhere between $10 billion and $15 billion to maintain its ratings, which are now just one notch above junk.

Late last month, Moody’s said the company had $16 billion in future commitments and that a downgrade would be possible if it deemed any capital increase inadequate relative to that. The company has $11.5 billion in debt due Feb. 1, 2026, and has pledged to issue $4.7 billion of its stock to acquire Spirit AeroSystems (NYSE: ) and assume its debt.

Moody’s, which has Boeing’s Baa3 rating for a downgrade to junk, declined to provide further details.

Creditsights analyst Matt Woodruff estimated the company needs to raise $12 billion to $15 billion to keep Moody’s (NYSE: ) from downgrading its ratings, especially if the strike extends throughout this month.

It is not clear, however, whether any of the fundraising options that involve raising cash through instruments other than common stock would satisfy the credit agencies.

S&P Global Ratings aerospace director Ben Tsocanos told Reuters that issuing common stock would be better from a credit perspective.

“We would view preferred stock that had a required payment as more debt-like and less rating-supportive,” he said.

S&P said Tuesday it placed Boeing’s rating on CreditWatch negative, saying the planemaker will likely need additional financing.