Boeing Secures $21 Billion in Capital to Strengthen Liquidity
Boeing Co. has raised approximately $21 billion through an upsized share sale, marking one of the largest capital raises by a public company, aimed at reinforcing its balance sheet
Boeing Co. has raised approximately $21 billion through an upsized share sale, marking one of the largest capital raises by a public company, aimed at reinforcing its balance sheet amid ongoing cash burn.
The aerospace giant sold 112.5 million common shares at $143 each, according to a statement, pricing the stock at a roughly 7.7% discount to Friday’s closing price of $155.01.
$5 billion through the sale of depositary shares
Additionally, the company raised $5 billion through the sale of depositary shares, each representing a 1/20th interest in mandatory convertible preferred shares, as per the statement.
This capital infusion addresses a critical task for new Chief Executive Officer Kelly Ortberg. Boeing's balance sheet has been under pressure following years of disruption and the ongoing impact of a now seven-week strike, which has severely hampered production of its primary revenue driver, the 737 Max. The funds are essential for Boeing to maintain its investment-grade credit rating and to ramp up production once the strike concludes.
Continued cash burn: free-cash outflow to approximately $14 billion for the year
Boeing is expected to spend around $4 billion in cash during the fourth quarter, potentially bringing its free-cash outflow to approximately $14 billion for the year. The company projects continued cash burn through the first half of next year as it reactivates manufacturing operations, including its 737 Max assembly lines.
Shares closed down 2.8% at $150.69 in New York on Monday, reflecting a decline of about 42% year-to-date, making it the second-worst performer in the Dow Jones Industrial Average.
Boeing’s workforce tensions continue, as factory workers recently voted against the latest contract offer, which proposed a 35% wage increase over four years. In a memo dated Oct. 11, Ortberg announced plans to reduce the workforce by approximately 10%.
Boeing issues up to $25 billion in equity and debt
On Oct. 23, Boeing received SEC approval to issue up to $25 billion in equity and debt. The company has also secured a new $10 billion credit facility, providing “additional short-term access to liquidity as we navigate a challenging environment.”
Ortberg is considering further portfolio streamlining measures, with a comprehensive review of Boeing's business operations set to conclude by year-end. The review includes weighing options for the future of the Starliner space capsule program, Bloomberg News has reported.
Underwriters: additional 16.9 million common shares & $750 million in depositary shares.
Underwriters have the option to sell an additional 16.9 million common shares and $750 million in depositary shares.
Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co. led the fundraising, while Wells Fargo & Co., BNP Paribas SA, Deutsche Bank AG, Mizuho Financial Group Inc., Morgan Stanley, Royal Bank of Canada, and SMBC Nikko participated. PJT Partners Inc. acted as Boeing’s financial adviser for the offerings.