Boeing Co. is borrowing in the bond market after two deadly crashes for one of the planemaker’s most important products have cut into its cash flow.
The aircraft manufacturer is selling senior unsecured bonds in as many as five parts, a person with knowledge of the matter said on Tuesday. The longest portion of the offering, a 30-year security, may yield around 1.25 percentage points above Treasuries, said the person, who asked not to be identified as the details are private. The company is also getting US$1.5 billion of short-term bank loans in a separate financing, according to a filing.
Boeing has been on the defensive since its 737 Max planes have crashed in Indonesia and Ethiopia, killing 346 people in a span of five months. The plane has been grounded, and the company working to convince airlines and regulators that it will be safe once a software update is installed. Chief Executive Officer Dennis Muilenburg at the planemaker’s annual meeting on Monday defended a software system linked to the two crashes, but failed to discuss whether the original design was fatally flawed.
The plane has been grounded in the wake of the crashes, meaning Boeing can’t deliver new planes to airlines. Most of the payment comes at delivery, so the company’s cash flow is under pressure.
The company successfully approached capital markets soon after the first fatal crash, a Lion Air flight in Indonesia last October. Boeing was able to sell US$700 million of bonds the same day, with order books for the 30-year notes nearly 7-times covered. It also borrowed US$1.5 billion of bonds in February.
The proceeds of Tuesday’s sale will be used for purposes including repaying debt, buying back stock, acquisitions and capital expenditure, the person said.
Citigroup Inc., Bank of America Corp., BNP Paribas SA, JPMorgan Chase & Co., Mizuho Financial Group Inc., Societe Generale SA, Mitsubishi UFJ Financial Group Inc., Credit Agricole SA, Sumitomo Mitsui Banking Corp., Goldman Sachs Group Inc. and Wells Fargo & Co. are managing the sale, the person said.
--With assistance from Natalya Doris, Brendan Case and Julie Johnsson.
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