Boeing kicks off massive share sale as it looks to dodge junk credit rating

Boeing is planning a USD 19 bn share sale that will see the embattled planemaker offering up 90 mn ordinary shares and USD 5 bn in depositary shares, the company said yesterday in a filing to the US Securities and Exchange Commission. The offering — which could land Boeing up to USD 21.8 bn in proceeds when factoring potential over allotments — comes as it looks to shore up liquidity and prevent its credit rating from descending to junk status, Bloomberg reports.

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The proceeds of the share sale will go towards general corporate purposes, “which may include, among other things, repayment of debt, additions to working capital, capital expenditures, and funding and investments in our subsidiaries,” the aerospace giant said in its filing. Boeing will likely funnel some of the fresh funds towards restarting and scaling production once an agreement is hammered out to end an ongoing worker walkout.

Market reaction: The company’s shares closed down 2.8% yesterday at USD 150.69 apiece.

REFRESHER- Boeing unveiled plans earlier this month to raise up to USD 25 bn through stock and debt offerings and another USD 10 bn in credit from major lenders as it struggles to maintain its credit rating with USD 11.5 bn in company-owed debt maturing through 1 February 2026. The present crisis marks the first time that the planemaker has found itself at risk of losing its investment-grade credit rating.

Boeing has had a rough time of it as of late: The company reported USD 6 bn in third quarter losses last week, putting its losses so far this year at some USD 8 bn, with CFO Brian West painting a bleak picture for the firm’s freecash flows well into next year. A six week-long walkout by machinists has halted production at several of the aircraft maker’s production lines, including those for “cashcow” 737 Max aircraft. The strike is estimated to cost Boeing up to USD 1 bn per month and negotiations with the 33k striking workers hit a deadlock over pensions last week.

The aircraft maker is also grappling with the fallout from a string of recent safety failures, beginning with a mid-air panel blow out on a Boeing aircraft in January that pushed the US Federal Aviation Administration to put in place a production cap on the 737 Max line. This was followed by whistleblower claims that the aircraft maker is not adhering to safety guidelines at its production plants.

ADVISORS- Boeing tapped Goldman Sachs, BofA Securities, Citigroup and JP Morgan as lead joint bookrunning managers on the offering, while Wells Fargo Securities, BNP Paribas, Deutsche Bank Securities, Mizuho, Morgan Stanley, RBC Capital Markets and SMBC Nikko are acting have stepped in as joint bookrunning managers.

MARKETS THIS MORNING-

Asia-Pacific markets are off to a good start this morning, with most indexes in the green in early trading. Japan’s Nikkei extended yesterday’s gains, while the Hang Seng Index and mainland China’s Shanghai Composite are also up. Korea’s Kospi index is down slightly.

It’s a different view over on Wall Street, where US futures are all in the red despite the Dow Jones, S&P 500, and Nasdaq all closing up yesterday.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 5.4 bn. The index is up 0.7% YTD.

In the green: Red Sea (+8.3%), Zamil Industrial (+5.6%) and Al Arabia (+4.3%).

In the red: Al Baha (-7.7%), Smasco (-3.0%) and Nama Chemicals (-3.0%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.4% yesterday on turnover of SAR 78.4 mn. The index is up 9.3% YTD.

In the green: Al Rashid Industrial (+20.2%), Qomel (+6.7%) and Mobi Industry (+5.7%).

In the red: Banan (-16.1%), Munawla (-7.3%) and Naas Petrol (-6.9%)

CORPORATE ACTIONS-

Saudi Fransi Capital will distribute SAR 8.2 mn in dividends at SAR 0.16 apiece to unitholders of Taleem REIT Fund for 3Q 2024, it said in a disclosure to Tadawul. Distributions will be made within 15 business days of the announcement.

Banque Saudi Fransi has received regulatory approval for a 107.4% capital increase to SAR 25 bn via the issuance of bonus shares at a rate of 1.07 share for every existing share, according to a CMA statement. The capital increase will be financed by transferring SAR 5 bn from BSF’s statutory reserve and SAR 7.95 bn from retained earnings.