Boeing Secures $10 Billion Credit Agreement to Bolster Balance Sheet
Skift Take
Key Points
- Boeing secured a $10 billion credit agreement to strengthen its financial position amidst ongoing challenges including a major strike affecting production.
- Credit rating agencies have suggested possible downgrades for Boeing, which could raise borrowing costs and worsen financial strains.
- Boeing faces additional challenges with the delay of its 777X airliner rollout and plans to lay off around 10% of its workforce.
Summary
Boeing has entered into a $10 billion credit agreement to bolster its balance sheet as it navigates significant challenges, including a major strike that has halted 737 Max production. Credit agencies are considering downgrading Boeing's rating, which would increase borrowing costs. The company is also delaying the rollout of its 777X airliner and plans to lay off 10% of its workforce, adding further strain to its operations.
The Boeing Company announced Tuesday that it entered a $10 billion credit agreement. The deal with a consortium of major banks should help the troubled planemaker shore up its balance sheet.
Boeing is currently navigating a series of high-profile challenges including a major strike that has halted production of its best-selling 737 Max aircraft. In a statement, the company said it will pay a 0.5% funding fee for each advance made under the deal. The full terms can be viewed here.
In recent weeks both S&P and Moody’s have suggested they may downgrade Boeing’s credit rating. If realized, this would almost certainly increase the cost of borrowing for the manufacturer.
In a statement shared with the Air Current, Emirates president Sir Tim Clark raised the possibility of Boeing encountering major financial problems. “Unless the company [Boeing] is able to raise funds through a Rights Issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon,” said Clark.
Sir Tim’s intervention is particularly notable given Emirates is one of Boeing’s largest customers.
A Boeing spokesperson told Skift: “The credit facility provides additional short term access to liquidity as we navigate through a challenging environment. The company has not drawn on this facility or its existing credit revolver.”
Boeing’s Worsening Week
Last week, Boeing CEO Kelly Ortberg told employees that the company is delaying the launch of its flagship 777X airliner and will lay off roughly 10% of its workforce. As part of the shake-up, around 17,000 staff are expected to lose their jobs.
“Our business is in a difficult position, and it is hard to overstate the challenges we face together,” Ortberg said in the October 11 note.
Some Wall Street estimates put the monthly cost of Boeing’s strike at nearly $1 billion. Members of the IAM labor union downed tools on September 13 in a high-stakes dispute over pay and conditions.
Last Tuesday, the planemaker withdrew its “best and final” pay offer to 33,000 striking workers. This development increases the likelihood of the dispute dragging on, jeopardizing further aircraft deliveries to airlines and putting additional strain on Boeing’s balance sheet.
This story has been updated to include comment from a Boeing spokesperson.
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Photo Credit: Boeing 737 MAX 9 Boeing / Boeing
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