Boeing is prepared to raise $25 billion via a stock and debt offering and has entered into a $10 billion credit agreement amid strike action.
The plane company is preparing access to its liquidity in response to financial struggles caused by a union strike that started on September 13th and a halt in production of its 737 MAX plane following a door panel blowout that happened during an Alaska Airlines flight. Boeing said in a statement that they haven’t touched the $10 billion credit line, nor has it pulled from its current credit line.
Experts estimate that Boeing will need to raise about ten to fifteen billion dollars in its stock offering to maintain its already poor credit ratings, which have been deteriorating due to its recent financial woes.
The Boeing strike and financial woes
On September 13th, more than 33,000 workers represented by the Machinists Union went on strike. The strike has been nothing short of crippling for the plane company, costing them more than one billion dollars per month. Furthermore, Boeing recently announced it would be laying off about 17,000 people, or about 10 percent of its workforce, due to financial woes.
The company is increasing its accessible liquidity to weather the coming storm as the strike continues, but the move comes with considerable risk. Banks warned Boeing that they are at serious risk of losing their investment-grade credit rating and could go into junk territory if they are not careful.
However, Boeing claims that having access to more money during a “challenging environment” is essential for its future.
“These are two prudent steps to support the company’s access to liquidity,” Boeing said in a statement.
They also say their move into the stock market to conduct a stock and debt offering gives them much-needed flexibility.
“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,” Bowing said.
The plane company was already struggling financially after the COVID pandemic slowed down plane demand. Their financial woes only worsened after that, as their planes and systems malfunctioned. The most notable breakdown was the door panel blowout on the Alaska Airlines flight in January. The Alaska Airlines debacle led to some of their planes being grounded and manufacturing halts for some plane models.
Boeing CEO Kelly Ortman said:
“Our business is in a difficult position, and it is hard to overstate the challenges we face together. Beyond navigating our current environment, restoring our company requires tough decisions and we will have to make structural changes to ensure we can stay competitive and deliver for our customers over the long term.”
