Boeing aims for capital boost exceeding $15 billion beginning Monday

Boeing Co. is planning to launch a capital raise as early as Monday, according to people familiar with the matter, in an offering that would help the troubled aeroplane maker boost its liquidity, according to a detailed report by Bloomberg.

The Bloomberg report further stated that the air-line major is set to raise more than $15 billion from the fundraising, one of the people said, adding that the amount could still rise depending on demand and need. Boeing’s advisers have been lining up potential investors for the offering, according to people familiar with the matter, who asked not to be identified as the information isn’t public as of yet.

Transaction to include shares and debt

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The transaction is likely to include shares as well as debt that can be converted into equity, the people said. The company on October 23 received clearance from the US Securities and Exchange Commission to sell as much as $25 billion of equity and debt, a move that could help Boeing avoid having its credit rating downgraded to junk.

Deliberations are ongoing and details of the offering, such as timing, could still change, the people said. A Boeing representative declined to comment on the issue. A $15 billion share sale would be the largest equity offering since SoftBank Group Corporation sold part of its stake in T-Mobile US Inc. in 2020, data compiled by Bloomberg show.

Boeing needs capital infusion to maintain an investment-grade rating

Boeing needs the capital infusion to maintain its investment-grade rating and fund its eventual recovery from a crippling strike, now in its seventh week. The company is on pace to use around $4 billion in cash during the fourth quarter, which would bring its free cash outflow to around $14 billion for the year.

Further, the Bloomberg report explained that the plane-maker expects to continue burning cash through the first half of next year as it restarts its aeroplane factories, including the assembly lines for its cash-cow 737 Max jetliner.

Boeing factory workers voted last week to reject the company’s latest contract offer, which included a wage increase of 35 per cent spread over four years. The company plans to cut its workforce by about 10 per cent, with reductions potentially including executives, managers and employees, Chief Executive Officer Kelly Ortberg said in a memo to employees on October 11.

Boeing was weighing raising at least $10 billion by selling new stock and was working with advisers to explore its options, Bloomberg News reported earlier this month. Bank of America Corp. analyst Ronald Epstein on October 23 estimated the company would look to raise between $18 billion and $20 billion.

The company said on October 15 that it has a separate new credit agreement in place for $10 billion, giving it “additional short-term access to liquidity as we navigate through a challenging environment.”

The Arlington, Virginia-based company reported third-quarter results on October 23, with revenue of $17.8 billion missing expectations and its two largest businesses both reporting widening losses. Boeing shares have slumped more than 40 per cent this year.

Boeing is considering options to streamline its broad portfolio, with Ortberg having begun a review of its businesses that he expects to conclude by the end of the year. The company is weighing options for the future of its troubled Starliner space capsule program as part of the review, Bloomberg News has reported. Whereas, Reuters reported earlier this month that Boeing planned to raise around $15 billion through stock and convertible bonds.

Market participants and global investors will closely follow these developments and make informed investment decisions on the actions Boeing takes to combat the current challenging economic environment for the company.