Boeing is considering options for raising cash as it faces a ratings downgrade, sources say

By Shankar Ramakrishnan, Allison Lampert, Echo Wang and Mike Stone

NEW YORK (Reuters) – Boeing is exploring options to raise billions of dollars by selling stocks and equity-related securities, two sources familiar with the matter said, as the planemaker tries to keep its credit ratings from slipping into junk territory.

Boeing has received offers in recent weeks from investment banks, including Goldman Sachs, JPMorgan, Bank of America and Citigroup, proposing various fundraising options, according to four sources familiar with the matter.

According to the sources, these options include the sale of common shares as well as securities such as mandatory convertible bonds and preferred shares. One of the sources said she had suggested Boeing raise around $10 billion.

Such hybrid bonds may be treated as equity by rating agencies, meaning their issuance would not increase debt to the same extent as selling bonds while potentially being cheaper for existing shareholders.

The sources said banks have also set up so-called shadow books to gauge investor interest in such securities in case Boeing decides to move forward. Some investors have approached banks and told them they would be interested in buying Boeing's preferred securities if they were issued, two of the sources said.

Boeing and the investment banks declined to comment. The sources, who requested anonymity because these discussions are confidential, said Boeing has not yet decided whether to pursue any of these options. It was not clear when a decision might be made.

Last month, Boeing CFO Brian West said at a Morgan Stanley conference that the company is “constantly evaluating our capital structure and liquidity levels to ensure we meet our debt maturities over the next 18 months while maintaining confidence in our credit rating.” as investment grade.” “

It is crucial for the aircraft manufacturer to maintain an investment grade rating, which has never fallen below this threshold. Ratings can not only determine a company's cost of capital, but also give it access to stable money from institutional investors.

Boeing's finances have been under pressure since a Jan. 5 incident in which a door panel on a 737 MAX jet model was torn off in mid-air led to a slump in production of the jet. Then last month, workers went on strike, further disrupting production and leaving them cashless.

The company has about $60 billion in debt and reported an operating cash flow loss of more than $7 billion in the first half of 2024.

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Analysts estimate Boeing would need to raise between $10 billion and $15 billion to maintain its ratings, which are currently just one notch above junk.

Late last month, Moody's said the company had $16 billion in upcoming obligations and that a downgrade was possible if a capital increase was deemed insufficient relative to that. The company has $11.5 billion in debt due February 1, 2026, and has committed to issuing $4.7 billion of its stock to acquire Spirit AeroSystems and reduce its debt take over.

Moody's, which is reviewing Boeing's Baa3 rating for a downgrade to junk, declined to provide further details.

Matt Woodruff, an analyst at Creditsights, estimates that the company will need to raise $12 billion to $15 billion to prevent Moody's from driving its ratings into the trash, especially if the strike continues throughout this month.

However, it is not clear whether any of the fundraising options that involve raising cash through instruments other than common stock would satisfy credit agencies.

Ben Tsocanos, director of aerospace at S&P Global Ratings, told Reuters that issuing common shares would be better from a credit perspective.

“We would view preferred shares that require payment as more debt-like and less supportive of the rating,” he said.

S&P said Tuesday that Boeing's CreditWatch rating was negative and that the planemaker likely needed additional financing.

(Reporting by Allison Lampert in Montreal, Shankar Ramakrishnan and Echo Wang in New York and Mike Stone in Washington; Editing by Paritosh Bansal and Matthew Lewis)