Boeing unveils $19b share sale to prevent downgrade
Boeing Co. (BA) launched on Monday a substantial $19 billion share sale, marking one of the largest public offerings ever, as it aims to secure liquidity and avoid a potential downgrade to junk credit status. The company announced plans to sell 90 million common shares along with approximately $5 billion in depositary shares.
At Friday’s closing share price of $155.01, the common stock sale alone would raise nearly $14 billion, making it the largest US share sale since SoftBank’s 2020 partial divestment in T-Mobile. Boeing’s shares dropped 1.9 per cent as trading opened in New York, continuing a year-to-date decline of about 40 per cent, the second worst among Dow Jones stocks.
With overallotments, the offering could reach approximately $21.8 billion, per Bloomberg estimates. The funding represents a critical task for new CEO Kelly Ortberg, who faces a strained balance sheet, worsened by a seven-week strike impacting the production of Boeing’s key revenue driver, the 737 Max jetliner. Boeing needs this capital to uphold its investment-grade rating and resume production once the strike concludes.
The company expects a cash outflow of about $4 billion for the fourth quarter, bringing the year’s total to approximately $14 billion. This trend will likely extend into the first half of next year as Boeing restarts its aircraft production, including for the 737 Max.
Last week, Boeing’s workforce rejected a contract proposal featuring a 35 per cent wage increase over four years. Additionally, Ortberg disclosed plans to reduce staffing by 10 per cent, according to an Oct. 11 memo.
On Oct. 23, the US Securities and Exchange Commission authorised Boeing to issue up to $25 billion in equity and debt. Boeing also arranged a $10 billion credit line, which provides it with “short-term liquidity to manage through current challenges.”
As part of a company-wide review, Ortberg is considering changes to Boeing’s diverse portfolio, with an assessment expected by the end of the year. This includes potential decisions on the future of the Starliner space capsule program, as previously reported by Bloomberg.
For the offering, depositary shares will equate to 1/20th of newly issued mandatory convertible preferred stock, which will convert by October 2027 or sooner based on a set formula. Underwriters have the option to purchase an additional 13.5 million common shares and $750 million in depositary shares to cover overallotments.
PJT Partners is serving as Boeing’s financial advisor for the offering. Goldman Sachs, BofA Securities, Citigroup, and JP Morgan are leading the joint bookrunning, supported by Wells Fargo, BNP Paribas, Deutsche Bank, Mizuho, Morgan Stanley, RBC Capital Markets, and SMBC Nikko.
Attribution: Bloomberg
