Boeing Files $25 Billion Shelf Registration Amid Financial Struggles

Boeing's Financial Woes

Boeing, the embattled aircraft manufacturer, has filed a $25 billion shelf registration. This move comes just days after Boeing revealed plans to slash 10% of its workforce due to mounting financial pressures, such as dwindling cash reserves, the risk of a credit downgrade, and a protracted strike. In the filing, Boeing stated, "This universal shelf registration provides flexibility for the company to seek a variety of capital options as needed to support the company's balance sheet over a three-year period."

Boeing's Credit Agreement and Stock Offering

In a separate move, Boeing entered into a $10 billion "supplemental credit agreement" with a group of lenders. The company noted that this credit facility offers "additional short-term access to liquidity as we navigate through a challenging environment." It also clarified that it has not yet drawn down on this facility or its existing credit revolver. According to sources cited by The Wall Street Journal, Boeing is likely to pursue a stock offering of approximately $10 billion.

Boeing's Financial State

Boeing has not turned a profit since 2018 and has already burned through $1 billion during the month-long strike. As of the end of September, it had $10.3 billion in cash and securities, which is roughly the minimum amount required to operate. The company also has $45 billion in net debt. Estimates from JPMorgan analysts suggest that if workers continue to strike and halt the production of commercial jets, Boeing could lose $1.5 billion each month. Three major rating agencies have cautioned that the strikes could lead to a downgrade of Boeing's investment-grade credit rating to speculative territory, or 'junk.'

Boeing's Efforts to Preserve its Credit Rating

Last month, CFO Brian West assured analysts at the Morgan Stanley conference that Boeing "will take any necessary actions" to maintain its investment grade rating and strengthen its balance sheet. "We are perfectly comfortable to supplement our liquidity position to support those two objectives," West told investors.

Analysts' Take on Boeing's Situation

Goldman analysts Noah Poponak and Anthony Valentini recently advised clients that Boeing faces a balance sheet question and has suggested that raising capital is a possibility given the importance of the credit rating. They assume that Boeing will raise $12 billion of equity before the end of the year, which would match the total maturities due in 2025 and 2026, and keep the cash balance well above $10 billion in the near to medium term.

Boeing's Workforce Reductions and Union Talks

The CEO recently sent a memo to employees about upcoming reductions of executives, managers, and employees, warning that the business is in a difficult position. Boeing's latest discussions with its union to resolve the issue of 33,000 striking employees at its main Seattle-area facilities collapsed last week. This led S&P Global Ratings to place the aircraft manufacturer on CreditWatch negative, with increasing risks that its investment-grade credit rating would be downgraded to junk.

Boeing's Market Performance

Following the news of the shelf registration, Boeing shares increased by about 1%. However, on the year, shares are down 43%, trading around $148-$150.

Bottom Line

Boeing's filing of a $25 billion shelf registration highlights the company's desperate need for liquidity amid financial struggles and workforce reductions. The company's future actions to preserve its credit rating and restore its balance sheet will be closely watched by investors and analysts. What do you think about this development? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, delivered every day at 6pm.