BOEING BORROWING MONEY
By Todd Horwitz
Boeing Considers Raising Debt
Boeing Co. is examining plans to raise more debt to bolster finances strained by the mounting fallout from the grounding and halted production of its 737 MAX, according to people familiar with the matter. The aerospace giant isn’t running out of cash, but costs associated with the MAX crisis are rising, leading to the prospect of borrowing more money.
Boeing plans to halt production of the plane this month, lowering some costs but pushing back the likely date at which payments for finished planes would resume. The company said Monday it would reassign up to 3,000 workers that make MAX jetliners, while its biggest supplier Spirit AeroSystems Holdings Inc. announced plans for voluntary layoffs ahead of its own planned production halt.
Even though Boeing ended the third quarter with nearly $10 billion in cash, the opportunity for companies to borrow has rarely been cheaper. Risk premiums on bonds similarly rated to Boeing are hovering near a two-year low. Investment-grade yields are close to the lowest in seven years.
Boeing nearly doubled the size of its credit facilities to $9.5 billion in October, giving it more access to capital amid the 737 Max crisis. The company raised $5.5 billion of debt in July to help fund its joint venture with Embraer SA, and credit raters maintain that Boeing’s liquidity is strong.
Analysts expect Boeing to raise as much as $5 billion in additional debt to help cover expenditures that could top $15 billion in the first half of this year. The company has long held around $10 billion in spare liquidity. In addition to spending on maintenance for the grounded MAX fleet and finished planes, the company plans to close its $4 billion acquisition of an 80% stake in the Brazilian plane maker Embraer SA ’s commercial airliner business. Boeing also has to repay some existing debt and fund shareholder dividends.
Chief Financial Officer Greg Smith said in October, when Boeing last provided guidance related to the MAX return to service, that the company didn’t expect to have to resort to certain unspecified “levers” to improve its finances. Mr. Smith is also serving as interim chief executive until David Calhoun takes over on Jan. 13 following last month’s ouster of Dennis Muilenburg. Now, alongside raising more debt, Boeing is also thinking of deferring some capital expenditures, freezing acquisitions and cutting spending on research and development to preserve cash, people familiar with those possibilities said.
Todd “Bubba” Horwitz