Boeing Analysts See Silver Lining As Troubled Plane Maker Plans To 'Shore Up' Balance Sheet With $25B Financing

Benzinga · 10/15 17:37

Analysts regard Boeing Co.’s (NYSE:BA) plans to raise as much as $25 billion through a mixed offering of common stock as a “positive.”

What Happened: Alongside this capital raise, the aerospace manufacturer has secured a $10 billion credit agreement with a consortium of leading financial institutions, including Bank of America, Citibank, Goldman Sachs, and JPMorgan.

According to Bank of America analysts, the three-year time horizon for the capital raise is a smart move.

“We expect Boeing to offer equity first, which should shore up the company’s balance sheet in the near term while maintaining the option to later issue debt with a lower risk of a credit downgrade,” the analysts said in a note Tuesday.

The $10 billion credit facility also includes escalators tied to Boeing's credit rating, potentially raising the borrowing rate by as much as 62.5 basis points if the company’s financial standing deteriorates.

Analysts currently maintain a neutral rating on Boeing. They await more details on the final pricing and structure of the securities to be issued.

Bank of American analysts note that Boeing would likely issue between $10 billion and $15 billion in equity to maintain its investment-grade credit rating.

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Why It Matters: This financial maneuvering comes at a critical juncture for Boeing. The 108-year-old company faces intense scrutiny over the safety of its equipment, leadership overhauls and internal labor strife.

About 33,000 workers have been on strike since Sept. 13, seeking a 40% wage increase over four years.

The ongoing labor dispute has further strained Boeing’s operations, especially in non-core areas.

Boeing expects to send 60-day notices to thousands of workers, or roughly 10% of its staff. These workers reportedly fall outside of the company's core 737 production line.

Some of those workers are likely union members, according to Bloomberg (see below).

Boeing delivered the last 747 model in early 2023 and stopped making the 767 in 2014. As for the 787, fixes to that aircraft “could take longer than expected,” Bank of America warns.

“Reputation risk stemming from recent incidents could result in fewer incremental orders,” analysts added.

Reduced oil demand is also good for Boeing. However, the analysts wrote that a “sharp and prolonged surge” in oil prices to above $100 per barrel would negatively affect aircraft demand.

“A downturn in commercial aviation, due to an exogenous factor, could adversely affect financial results,” they said. “As aircraft are priced in USD, an unexpected rapid revaluation in the dollar could significantly affect order activity.”

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Image: Courtesy of Boeing