Boeing sold $3.5 billion in senior unsecured bonds earlier this week and borrowed $1.5 billion in short-term loans from its relationship banks. This comes after 2 deadly plane crashes forced the aircraft manufacturer to scale back production of its most profitable aircraft and cut into cash flow, and is the largest financing the company has pulled off since its 737 Max plane crashed in Ethiopia in March. Regulators worldwide grounded the plane after this latest crash, the second time the jet had gone down in a span of 5 months, preventing Boeing from delivering new 737 Max aircraft to airlines.
The fallout from the safety concerns has not affected the company’s credit ratings, which remain at a single-A level, a sweet spot that signals credit worthiness but yet pays a reasonable spread over treasuries. Aside from boosting Boeing’s liquidity, proceeds from the sale of bonds will be used for general corporate purposes, including repaying debt, buying back stock, acquisitions and capital expenditure. The offering came in 5 parts with the longest tenor being 30-years, and were offered at yields above the current levels for the company’s outstanding debt – with a new issue premium – typical for a new bond sale, but spreads narrowed significantly post issue. Boeing had more than $15.5 billion of debt outstanding at the end of March. It had issued $700 million of bonds on the same day last October after the first fatal crash in Indonesia by a Lion Air flight, and also sold $1.5 billion of bonds in February 2019.