BUSINESS Boeing raises $25 bln in blowout debt sale under COVID-19 crisis

BUSINESS

Boeing raises $25 bln in blowout debt sale under COVID-19 crisis

CGTN

10:55, May 01, 2020

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A Boeing factory in Renton, Washington, U.S., April 29, 2020. (Photo: VCG)

Boeing raised 25 billion U.S. dollars in a bond offering on Thursday, a blowout result for the planemaker, which is shoring up its finances during the coronavirus-induced travel downturn.

Boeing's capital raise is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data. The Federal Reserve's intervention in the credit market has boosted prospects for troubled borrowers such as Boeing. 

The U.S. central bank has slashed interest rates to zero and rolled out around 2 trillion U.S. dollars in lending commitments. While it has not yet snapped up any corporate bonds such as Boeing's, its openness to doing so has buoyed credit markets.

The planemaker has been trying to bring its 737 MAX jets back to service after two fatal crashes, while the coronavirus pandemic has hammered aviation and other industries worldwide. Business shutdowns around the world to curb the outbreak have dried up demand for air travel.

Earlier this week, Boeing was hoping to raise between 10 billion U.S. dollars and 15 billion U.S. dollars in the bond offering, but increased the size of the deal due to the strong investor demand, according to people familiar with the matter.

Boeing Chief Financial Officer Greg Smith declined to say during a conference call on Wednesday how much liquidity the company needed or would seek from private debt markets versus government aid programs.

"We've got good options out there to help for the near term liquidity and give us appropriate cash," Smith said.

Credit ratings agency Moody's Investors Service Inc estimated this month that Boeing's funding needs could top 30 billion U.S. dollars in 2020. The company secured about half of this by drawing down on a 13.8-billion-U.S. dollar credit line in March, Moody's said.

Boeing sold seven new bonds with maturities ranging from 2023 to 2060. The new funds came at a higher price for Boeing than prior bond offerings, a sign of the company's precarious financial situation.

Among the debt sold was a 10-year bond with a 5.15 percent yield and a 450 basis point premium to U.S. Treasuries of a comparable duration, according to Refinitiv IFR data. By comparison, Boeing sold a 10.5-year bond in July with a 2.96 percent yield and at a 90 basis point premium to U.S. Treasuries.

S&P on Wednesday lowered its credit rating for Boeing to BBB-minus, one step above junk.

To placate investors over the risk of a potential downgrade to junk status in the future, the bonds contained a provision that raises the coupon paid to bondholders if Boeing loses its investment-grade status.

Boeing said this week it would cut its 160,000-person workforce by about 10 percent, further reduce 787 Dreamliner production and try to boost liquidity as it prepares for a years-long industry recovery from the pandemic, which drove its second consecutive quarterly loss. 

Boeing shares closed up 1.5 percent on Thursday at 141.02 U.S. dollars.

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