Both companies are in talks to jointly manufacture smaller commercial aircraft. And as a way to fund this venture, Boeing Co. is set to sell saving bonds worth $5.5 billion.
A recent filing has revealed that Boeing is ready to sell, in 6 parts, some of its senior unsecured bonds. Among the offerings of the bonds are the assurance of forty-year security, and a yield of 1.4% points above the Treasuries. However, as at the time of this report, Boeing is yet to release an official statement regarding the bonds sale.
If successful, Boeing will be going into this deal at a time when it is battling with the worldwide grounding of its infamous 737 max. Also, just last week, the aircraft giant revealed that it was considering either slow down the production of 737 Max or temporarily halting its production. This is apparently because of the flying ban most countries have placed on it. And to compensate for lessons and affected airlines, the company is also charged to pay $4.9 billion after tax.
The Nature of the Bonds
The bonds trading between Boeing and Embraer is expected to feature attractive concessions from both ends. Ashwin Tiruvasu, an analyst at CreditSights, opine that both aircraft builders have a good record in terms of plane maker’s debt recommendation.
Embraer got it shareholder’s go ahead in February to partner with Boeing in this venture. The partnership will make both companies. A better competitor against Airbus SE. Dennis Muilenburg, the CEO of Boeing, expressed confidence in the venture materializing by the end of this year.
Boeing’s Credit Rating at Risk
The fact that Boeing’s Max 737, which is the best-selling of their brand, has been grounded is affecting the company’s credit rating. For instance, investors from Moody and Flitch have indicated that they now have a negative rating for the airline. The same applies to S&P Global. However, on their part, they only said they would keep their credit watch on Embraer because it has now become complex to buy stocks or cryptocurrencies, which are just as relevant since the Bitcoin Evolution.
There is no doubt that Boeing is going through a very difficult time, but if the proposed partnership between it and the Brazilian airline giant can pull through, the difficult days may soon go away.