Boeing Dodges a Bullet
Company expects new liquidity to help it avoid any government aid that would have tied its hands on compensation, dividends and other restrictions, but credit rating inches closer to junk status.
American plane maker and defence giant Boeing dodged a huge financial bullet last week when financial markets reacted more than positively to what initially was a planned US$10bn (FJ$22bn) offering that quickly rose to US$25bn (FJ$55bn), allowing it to, at least for now, avoid any concessions it would have to make had it accepted what some said was a US$60bn (FJ$133bn) government aid package designed for it and its suppliers to help them weather the COVID-19 pandemic that has all but killed commercial aviation worldwide. Boeing, in a statement issued on April 30, said it was “pleased with the response to our bond offering today, which is one of several steps we’re taking to keep liquidity flowing through our business and the 17,000 companies in our industry’s supply chain. The robust demand for the offering reflects strong support for the long-term strength of Boeing and the aviation industry. It is also in part a result of the confidence in the market created by the CARES Act and federal support programmes that have been put in place – a testament to the administration, Congress and the Federal Reserve”.
Boeing said it closed the deal yesterday, adding “we do not plan to seek additional funding through the capital markets or the U.S. government options at this time. The bond offering includes debt instruments with an aggregate principal amount of FJ$35 billion across seven tranches with maturities ranging from three to 40 years. We will continue to assess our liquidity position as the health crisis and our dynamic business
Analysts said the seven-part offering includes bonds with 3-40 year maturities was oversubscribed and attracted better pricing than might have been expected for a company with Boeing’s credit rating and challenges. The offering carried pricing and concessions more akin to the top end of high-yield issuers, said analysts at CreditSights. S&P Global earlier downgraded Boeing to BBB-, a notch above speculative grade. If the deal closes as expected, it will be one of the largest ever corporate-bond offerings.