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Boeing agrees $25bn bond to weather stalled airline market

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: May 1, 2020

Boeing has raised $25bn bond to finance the troubled planemaker as it tries to plot a path through the coronavirus slowdown.

The aviation is among the worst-hit sector amid the pandemic, with some 90% of global flights cancelled. Many airline bosses say the industry will not recover for two to three years, collapsing demand of new planes.

Seattle-based Boeing’s new bond is understood to be spread across seven maturities from three to 40 years, with 10-year debt paying interest of 5.15 per cent. There was strong investor demand for the paper, allowing the company to increase the size of the debt from $10bn.

Boeing carries a rating of BBB- from the S&P, one notch above junk. To reassure investors, the bonds have a clause that would increase the coupon to investors if Boeing’s credit rating falls to junk.

“The robust demand for the offering reflects strong support for the long-term strength of Boeing and the aviation industry,” the company said. “As a result of the response, and pending the closure of this transaction expected Monday, 4 May, we do not plan to seek additional funding through the capital markets or the US government options at this time.”

It is also seeking US taxpayer funding to pay furloughed workers. It is expected to receive much of the $17bn of government funds set aside to aid for companies deemed critical to national defence. Boeing also makes military planes.

However, the Trump administration was understood to want to take a stake in the manufacturing giant if it came back for further cash. Boeing’s chief executive David Calhoun said earlier this month he would not let the government gain a shareholding in the firm, which this capital raising seems to stave off.

Boeing has announced a 10% cut to its workforce that could see the company cut  16,000 jobs. The group’s flagship 737 Max aircraft remains grounded after two crashes that killed 346 people.

Last month, the planemaker borrowed almost $14bn from Wall Street lenders including JPMorgan Chase and CitigrouBoieing

Boeing shares are down more than 56% this year as compared to a 9.8% decline in the S&P 500.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.