TLDR:
- Boeing secures $10 billion credit agreement and plans to raise up to $25 billion through stock and debt offerings
- Company faces ongoing labor strike and production challenges
- Boeing announces 10% workforce reduction (17,000 jobs)
- Strike estimated to cost over $1 billion per month
- Boeing has $11.5 billion in debt maturing through February 2026
Boeing, the aerospace giant, is taking significant steps to strengthen its financial position as it grapples with an ongoing labor strike and production difficulties. The company recently announced plans to secure up to $35 billion in new financing, a move aimed at shoring up its balance sheet during a tumultuous period.
On Tuesday, Boeing filed a mixed shelf registration with the Securities and Exchange Commission (SEC), indicating its intention to offer up to $25 billion in new debt securities, common stock, preferred stock, and other share offerings.
The company entered into a $10 billion supplemental credit agreement with a consortium of banks led by major financial institutions.
These financial maneuvers come at a critical time for Boeing. The company is currently embroiled in a labor dispute with its largest union, the International Association of Machinists (IAM), which has been on strike since September 13. The strike has led to the temporary suspension of production for several key aircraft models, including the popular 737 Max, 767, 777, and others. Industry estimates suggest that the strike is costing Boeing more than $1 billion per month.
Adding to the company’s challenges, Boeing is still grappling with the aftermath of a mid-air door blowout incident on an Alaska Airlines 737 Max jet earlier this year. This event led regulators to cap production of the 737 Max, Boeing’s best-selling aircraft. The company has also faced scrutiny over production issues with its 787 Dreamliner widebody jet.
In response to these mounting pressures, Boeing’s new CEO, Kelly Ortberg, announced a significant restructuring plan. The company will reduce its global workforce by 10%, eliminating approximately 17,000 jobs across all divisions. This move is part of Boeing’s effort to streamline operations and improve its financial standing.
Boeing’s financial outlook remains challenging. The company expects to report a GAAP loss per share of $9.97 for the third quarter of 2024, with a negative operating cash flow of $1.3 billion. Furthermore, Boeing plans to take $5 billion in pre-tax charges, split between its commercial airlines and defense divisions.
The ongoing labor negotiations with the IAM have reached an impasse, with both sides unable to come to an agreement despite mediation efforts. The union initially rejected Boeing’s proposal of a 25% general wage increase and a $3,000 signing bonus. As the strike continues, its impact on Boeing’s operations and finances grows more severe.
Looking ahead, Boeing faces significant debt obligations, with $11.5 billion maturing through February 1, 2026. The company is also committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems and assume its debt. These financial commitments, coupled with the current operational challenges, underline the importance of Boeing’s recent financing initiatives.
Industry analysts estimate that Boeing may need to raise between $10 billion and $15 billion to maintain its credit ratings, which currently sit just one notch above junk status. The company’s ability to secure favorable terms for its planned stock and debt offerings will be crucial in navigating its current financial straits.
As of the end of September, Boeing reported having $10.3 billion in cash and securities on hand. The additional financing sought through the new credit agreement and potential stock and debt offerings aims to provide the company with a more substantial financial cushion as it works to resolve its labor issues and ramp up production.
Boeing’s stock price has shown resilience in the face of these challenges, with shares up over 2% in recent trading. However, the company’s long-term outlook remains uncertain as it navigates this period of operational and financial turbulence.
The aerospace manufacturer is set to release its full third-quarter financial results on October 23, which will provide a more comprehensive picture of the strike’s impact on its business and the effectiveness of its cost-cutting measures.
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