Boeing closes $15 billion in stock, hybrid bonds

Written by Shankar Ramakrishnan, Echo Wang

(Reuters) – Boeing is closing in on a plan to raise up to $15 billion in common shares and convertible bonds as the planemaker bails out due to a crippling strike, four sources familiar with the matter said. this matter told Reuters.

The company on Tuesday said in regulatory filings that it could raise as much as $25 billion in stock and debt through its risk-weighted investment model. One of the sources warned that the sale of $ 15 billion may not be enough for Boeing to fix its ongoing problems.

The airline giant has been dealing with increased regulatory scrutiny, production restrictions and a loss of confidence from customers since a door panel blew a 737 MAX plane off the air in early January. Shares are down more than 40% this year.

It has been burning cash all year, leading to its announcements Tuesday that it will raise money in the stock market and that it has also secured a $10 billion credit agreement with a major lender: Bank of America , Citibank, Goldman Sachs and JPMorgan.

Boeing declined to comment.

Four investment and banking sources said that representatives from the lenders were inquiring about the desire to issue new shares combined with a convertible bond – a hybrid bond that can be converted into equity first. on or before a predetermined date.

About $10 billion in new shares are being considered for sale by the company as well as about $5 billion in convertible bonds, the sources said.

One of the four sources said the deal was slated to close shortly after Boeing’s Oct. 1 earnings report. 23 in the third quarter. But one investor source said the company was trying to avoid raises during a month-long strike that analysts estimate is costing tens of millions of dollars a day.

“The timing of any rate hike remains unclear but the market consensus is that it should be done after the labor strike is resolved and earnings give visibility to its impact on cash flows. current and future income,” said Michael Barr, senior research analyst at Neuberger. Berman.

Although Boeing burned less free cash flow than expected during the third quarter, the plane maker may have no choice but to act before the strike to protect its investment position, sources said. two said.

Boeing’s shares have been rising since its cash-back announcement, suggesting some investors think the plane has been hit. The stock was up 1.1% at $154.01 by Wednesday afternoon.

One investor source said a three-year bond paying a 7% to 8% annual coupon that could convert into shares at a 20% premium to the current share price would be attractive. strong demand.

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The money is expected to ease the squeeze on existing shareholders whose holdings could be diluted when the company issues new shares.

The mandatory convertible option was pursued because such hybrid bonds would be considered equity capital by rating agencies, meaning that issuing them would not increase debt by the same amount as selling bonds. They are kind to existing shareholders, as the stock conversion is several years away and pays a lot of money.

Raising equity capital is the only financing option for debt-laden Boeing that is determined to protect its investment values.

The three top rating agencies – S&P, Moody’s and Fitch – have warned that they will reduce Boeing’s rating to zero if it raises new debt without releasing $11 billion in debt until March 1, 2026. .

(Reporting by Shankar Ramakrishnan and Echo Wang in New York, Tim Hepher in Paris and Allison Lampert in MontrealEditing by David Gaffen and Matthew Lewis)