Boeing Co. is preparing a plan to raise approximately $15 billion through a combination of common shares and mandatory convertible bonds as the company faces ongoing financial and production challenges, according to Reuters. The capital raise is intended to stabilize Boeing's balance sheet, which has been severely impacted by a prolonged labor strike and regulatory scrutiny following a near-accident involving a 737 MAX earlier this year.
The planemaker filed a shelf registration with the Securities and Exchange Commission (SEC) on Tuesday, allowing it to raise up to $25 billion in stock and debt, giving the company flexibility as it navigates its financial difficulties. Boeing is also exploring additional structured finance options, which could raise up to $5 billion through securitizing subsidiary revenue, Reuters reported.
The labor strike at Boeing's main hub in the Seattle area has halted production of the 737 MAX for over a month, further straining the company's finances. Boeing shares rose 1% following the announcement but remain down over 40% this year. The company has also secured a $10 billion credit line with major banks, including Bank of America, Citibank, Goldman Sachs, and JPMorgan, to provide short-term liquidity ahead of its October 23 earnings report.
Boeing is expected to offer $10 billion in new shares alongside nearly $5 billion in mandatory convertible bonds, according to sources cited by Reuters. These bonds, which convert to equity at a premium, aim to minimize immediate dilution for existing shareholders. Analysts suggest this strategy could help Boeing maintain its investment-grade credit rating, which is under threat as the company's cash burn continues.
"The timing of any equity raise is still unclear, but market consensus is that it should be done after the labor strike is resolved and earnings provide some visibility of its impact on current and future cash flows," said Michael Barr, senior research analyst at Neuberger Berman.
Despite some optimism following the funding announcement, Boeing's credit rating remains at risk. S&P, Moody's, and Fitch have all warned that a downgrade to junk status is possible if Boeing takes on new debt without reducing its existing $11 billion obligations, which are due by early 2026. Boeing's commitment to preserving its investment-grade status is seen as critical to its long-term stability.
To navigate these challenges, Boeing's financing strategy includes a mix of stock and hybrid bonds, allowing flexibility and minimizing additional debt. The company's approach aims to manage its liabilities while raising capital in a way that protects shareholder value.
