Boeing’s capital raise provides a breather through next year
Boeing got a safety net after raising about $21 billion
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Boeing Co. completed its about $21 billion capital raise this week, lifting the near-term danger that had spooked investors and threatened to send the company’s debt ratings to the riskiest trades.
The equity and debt raise is expected to cover Boeing’s
cash burn through the first half of next year and set it up to cover debt obligations maturing in 2025 and 2026.Boeing has struggled to keep its investment-grade debt rating, and the three major credit-rating agencies have the company at their lowest rung of investment grade.
A cut to “junk” status would raise Boeing’s interest costs and cut its bonds off from a larger pool of investors, including institutional investors that are only allowed to own investment-grade paper.
With the raise, “the balance sheet is largely derisked,” and the next steps for Boeing include reaching an agreement with striking factory workers and ramping up production to bridge 2026 free cash flow, Jefferies analyst Sheila Kahyaoglu said in a note Thursday.
The strike likely will end on the next vote, assuming some incremental concessions by Boeing, Ken Herbert with RBC Capital Markets said in his note. Workers went on strike on Sept. 13.
Herbert said he met recently with machinists on strike in Washington state, and based on “a very informal survey,” half of them view the return of pension benefits as a necessary step to resolving the dispute, he said. That has been a sticking point in the negotiations.
“However, we would note that our sample is skewed, as members that are still on the picket line tend to be more committed to the effort,” he said. The “vast majority” of the union members on strike are no longer on the picket line, and the pension is unlikely to be a priority for many of the younger members.
Most workers “are more focused on other benefits (ratification bonus, 401k contributions, other benefits) and the gross wage increase remains the focus,” Herbert said. Striking workers are getting $250 a week and no health benefits.
Shares of Boeing have lost about 43% this week, compared with an advance of around 11% for the Dow Jones Industrial Average
. Boeing is a Dow component.
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