Boeing is seeking financial reinforcement by issuing fresh shares and bonds.
Boeing, an American aircraft manufacturer, is currently facing a significant financial predicament. The company's ongoing strike is costing it over a billion dollars every month, pushing it to look for new sources of capital. This includes plans to sell new shares, which could generate up to $10 billion. Furthermore, they aim to raise an additional $15 billion through shares or bonds over the next three years. According to SEC filings, Boeing has also secured a new credit agreement with its lenders. There are speculations of an Initial Public Offering (IPO) that could bring in around $10 billion.
Boeing last recorded a profit in 2018. The strike by its largest union has only worsened its financial situation. Before the strike, the company was losing approximately $1 billion each month. As of September's end, Boeing had $10.3 billion in cash and marketable securities, almost at the minimum amount it considers necessary for operations.
The company's debt has escalated to $45 billion. The new $10 billion credit agreement with banks is an addition to its existing, uncashed revolving credit facilities of roughly $10 billion.
Negotiations hit a roadblock
In a statement, Boeing described these moves as sensible measures to improve its liquidity access. However, Boeing's stock value, which started the year around $250, was trading at around $150 in pre-market trading, with minimal changes. Rating agencies have expressed concerns that the company might need to seek more capital and its debt could be downgraded to a junk status.
Last week, Boeing announced its intent to reduce its workforce by around 17,000 jobs and predicted further losses. The manufacturing of most aircraft, including the best-selling 737, has been paused due to the prolonged strike by aircraft mechanics, which has persisted for over a month. In mid-September, 33,000 employees went on strike, requesting a 40% pay increase and the reinstatement of a performance-based pension. Boeing has proposed a 30% pay rise and plans to reintroduce a performance bonus and enhance retirement benefits. However, negotiations have reached a standstill.
Beyond job cuts, Boeing announced that the launch of the new 777X, already delayed by several years, will face further delays. The freight variant of the 767 will also be discontinued.
The company's financial predicament has led it to explore other ways to raise capital, such as an Initial Public Offering (IPO). Despite Boeing's plans to cut its workforce and pause aircraft manufacturing due to the strike, negotiations with the union for a resolution remain at a standstill.
