((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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Boeing plans to raise $15 billion through hybrid stocks and bonds -sources
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Also considering a structured financing transaction to raise $5 billion – source
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Company faces regulatory scrutiny, production cuts and loss of customer confidence
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Aircraft maker’s credit rating in jeopardy
(Added consideration of structured financing transaction in paragraph 3) by Shankar Ramakrishnan, Echo Wang and Tim Hepher
Boeing BA.N is moving closer to a plan to raise about $15 billion through common stock and a mandatory convertible bond, to shore up the plane maker’s finances, worsened by a crippling strike, but the timetable remains uncertain, four sources familiar with the matter told Reuters.
The company said in regulatory filings Tuesday that it could raise up to $25 billion in equity and debt as its investment-grade credit rating is at risk. One of the sources warned that a $15 billion sale may not be enough to allow Boeing to deal with its current crises.
Boeing is also considering a structured financing transaction to raise up to $5 billion, which could resemble securitizing a portion of a subsidiary’s revenue, according to another source familiar with its financing plans. Boeing did not immediately respond to a request for comment on the securitization plan, which had not been previously reported.
The aerospace giant is facing increased regulatory scrutiny, production cuts and a loss of customer confidence since a door panel came off a 737 MAX plane in midair. flight at the beginning of January. Stocks gained 1% on Wednesday, but are down more than 40% this year.
Boeing has been burning through cash all year, leading it to announce Tuesday that it would raise money in the capital markets and had also reached a $10 billion credit deal with major lenders : Bank of America BAC.N, Citibank CN, Goldman Sachs GS.N and JPMorgan JPM.N.
Four investors and banking sources said representatives of these lenders were inquiring about the interest in a combined offering of new shares and a mandatory convertible bond – a hybrid bond that could be converted into shares at a predetermined date or before this date.
According to these sources, the company is expected to sell approximately $10 billion in new shares and nearly $5 billion in mandatory convertible bonds.
One of the four sources said the deal was expected to be priced shortly after Boeing’s third-quarter earnings report on Oct. 23. But another investor source said the company was trying to avoid a fundraising during the month-long strike that analysts say is costing tens of millions of dollars a day.
“The timing of a capital increase is not yet clear, but the market agrees that it should take place once the strike has been resolved and the profits provide some visibility of its impact on current and future cash flows,” said Michael Barr, senior research analyst at Neuberger Berman.
Although Boeing burned less cash than expected during the third quarter, the plane maker may have no choice but to act before the strike ends to protect its investment grade, two of the sources said.
Boeing shares have rallied since its financing announcement, suggesting some investors believe the bottom has been reached.
An investor source said a three-year mandatory convertible bond paying an annual coupon of 7% to 8% and which can be converted into shares at a 20% premium to the current share price could attract a high demand.
The financing should soften the blow for existing shareholders whose equity stake might decline when a company issues new shares.
The mandatory conversion option was chosen because these hybrid bonds can be treated as equity by rating agencies, meaning that their issuance would not increase debt to the same extent as selling bonds. . They are more favorable to existing shareholders, given that the conversion of shares will only take place in a few years and will be accompanied by a premium.
Raising equity capital is the only financing option for Boeing, which is highly indebted and keen to protect its investment grade rating.
The three major rating agencies – S&P, Moody’s and Fitch – have warned that they will downgrade Boeing’s rating to “junk” if the company raises new debt without repaying the approximately $11 billion in debt maturing on February 1 2026.
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