Boeing initiates $19B share sale to prevent credit rating downgrade
Boeing has launched a nearly $19 billion stock sale, one of the largest ever by a public company. The strategic move is aimed at addressing Boeing's liquidity concerns, and preventing a potential downgrade of its credit rating. The aerospace giant plans to sell 90 million common shares and about $5 billion of depositary shares as part of the move, confirming an earlier report by Bloomberg News.
Share sale details and market response
The common share portion of the sale is anticipated to amount to nearly $14 billion, given Friday's closing price of $155.01. This would make it the biggest share sale since SoftBank Group's partial stake sale in T-Mobile in 2020. In premarket US trading, Boeing shares rose slightly by 0.9% as investors welcomed the potential stability this stock sale could provide to the company's balance sheet.
Boeing's financial challenges and workforce reduction plans
Boeing is already struggling financially as a seven-week-long strike has affected the production of its main revenue generator, the 737 Max jetliner. The company expects a cash usage of approximately $4 billion in Q4, resulting in an estimated free-cash outflow of about $14 billion this year. To combat this, CEO Kelly Ortberg has announced a 10% workforce reduction, which may include executives, managers, and employees.
SEC approval and new credit agreement
Separately, on October 23, Boeing had also received approval from the US Securities and Exchange Commission (SEC) to sell up to $25 billion of equity and debt. The company has secured a new credit agreement worth $10 billion, giving it "additional short-term access to liquidity as we navigate through a challenging environment." These measures are part of Boeing's broader strategy to stabilize its finances amid challenges.
Boeing's business review and future plans
Ortberg is reviewing options to streamline Boeing's massive portfolio, particularly the future of its troubled Starliner space capsule program. The business review is expected to be completed by the end of this year. The underwriters for the share sale have an option for an extra 13.5 million common shares and $750 million in depositary shares to cover overallotments, potentially increasing the total fundraising amount.
