(Photo: REUTERS/Kevin Lamarque)
On Thursday, Boeing Co secured $25 billion in a bond sale, a nailbiter result for the jet manufacturer which it disclosed has helped the company steer clear from taking government assistance in the midst of an ongoing global health emergency.
According to Refinitiv data, Boeing's cash infusion, first recorded by Reuters earlier this week, is the sixth biggest investment-grade bond issuance of all time and the largest year-to-date. The involvement by the Federal Reserve in the credit market has bolstered opportunities for distressed lenders like Boeing.
For this time, based on a company statement late Thursday after the bond offering, Boeing will not pursue additional financing from the capital markets or U.S. government.
On an earnings call Wednesday, management had suggested that the company was tapping a portion of the tax incentives accessible via the CARES Act and considering various financial instruments provided by the central bank as well as loans from the US Treasury.
With travel at a standstill, the company burned through the most cash ever in the first three months. Before the pandemic, Boeing was already suffering from the suspension of the 737 Max, but it aims to further improve liquidity by reducing jobs and output.
Last month, the company requested federal assistance of $60 billion for itself and its supply network, which includes Spirit Aerosystems and General Electric.
The $2.2 billion federal crisis relief Congress passed in March allotted $17 billion in loans for businesses considered to be of national security interest, a bill that Boeing fits.
Boeing chief executive officer Dave Calhoun has balked at the prospect of providing the government with an equity interest in exchange for federal funding, but all options were on the table this week, he said.
When asked if the company would apply for government loans, Calhoun told CNBC this week that after a number of stimulus programs, "credit markets eased up a fair amount."
Boeing was expecting to secure between $10 billion and $15 billion in bond offering, but raised the volume of the transaction to $25 billion because of the robust demand from investors, sources with knowledge of the deal, said.
Demand was boosted by high returns compared to Boeing's other bond issues, earnings report, and provisions in the offer that safeguard investors' interest in case of a credit standing downgrade to junk rating.
The debt was unloaded in seven parts, sources said. The longest portion, a 40-year security, provides 4.625 percentage points above Treasuries, after first discussing about 5.5 percentage points, they added.
