Boeing Raises Whopping $25 Billion Through Bond Offering, Won’t Pursue Government Bailout

The Boeing Company finally had a great week for once and managed to collect a massive $25 Billion though a bond offering in order to back the company up financially for the next few year amid an expectedly slow market for new aircraft.

The issues surrounding the 737 Max as well as the Coronavirus crisis that is currently decimating the aviation industry has been spelling bad news for the manufacturer.

Demand for new air frames will likely dry up in the next couple of years, in fact it has already dried up and Boeing is now finishing up old orders but can’t procure new orders.

Together with the expensive troubles as a result of the Boeing 737 Max fiasco this left the company with an urgent need for capital and management decided that a bond offering is the best route for that.

CNBC reported that Boeing managed to pull in a whopping $25 Bln last week through these Bond sales.

Boeing on Thursday said it doesn’t plan to seek federal aid after raising a whopping $25 billion in a bond offering, the company’s biggest debt sale ever, as it faces what it expects to be a multi-year slump in air travel because of the coronavirus pandemic.

“As a result of the response, and pending the closure of this transaction expected Monday, May 4, we do not plan to seek additional funding through the capital markets or the U.S. government options at this time,” it said in a statement.

Boeing last month sought $60 billion in federal aid for itself and its supply chain, which includes General Electric and Spirit Aerosystems. …

CFO Greg Smith, in a company post about the bond offering thanked the Trump administration for the recent stimulus measures and called investors’ response to Boeing’s debt sale “a testament to the confidence the market has in our business, our people, and our future.” …

Both Boeing and its main rival Airbus are facing their biggest crises ever as demand for new jets has evaporated in the pandemic and they burn through cash. The dismal environment for new passenger planes and aircraft services is making Boeing more reliant on its defense arm.

Boeing has scrambled to shore up liquidity and recently drew down a nearly $14 billion loan. CEO Calhoun told investors on Wednesday that the company is “intensely focused on ensuring liquidity through the immediate crisis.” …

It would have likely been easy for Boeing to procure government air considering it’s position as a U.S. industry icon and vital supplier to the U.S. Military but the company decided to pursue another avenue with the bonds instead.

The Boeing Press release was relatively short but to the point:

We’re pleased with the response to our bond offering today, which is one of several steps we’re taking to keep liquidity flowing through our business and the 17,000 companies in our industry’s supply chain.

The robust demand for the offering reflects strong support for the long-term strength of Boeing and the aviation industry. It is also in part a result of the confidence in the market created by the CARES Act and federal support programs that have been put in place – a testament to the Administration, Congress and the Federal Reserve.

As a result of the response, and pending the closure of this transaction expected Monday, May 4, we do not plan to seek additional funding through the capital markets or the U.S. government options at this time.

The bond offering includes debt instruments with an aggregate principal amount of $25 billion across seven tranches with maturities ranging from three to 40 years.

We will continue to assess our liquidity position as the health crisis and our dynamic business environment evolve.

The current business environment doesn’t bode well for either Boeing or Airbus for that matter. Media reports in most recent months reported favorable numbers for manufacturers of private aircraft but it remains to be seen if this demand will hold up or end up in free fall as well.

It’s a reasonable expectation that high net worth individuals who don’t want to deal with the new realities of commercial air travel will push up the demand of private aircraft in the interest of health and flexibility.

Conclusion

This became a really brutal period for Boeing. While the 737 Max mess is entirely their own doing the COVID-19 crisis was pretty much the nail in the coffin that required such a huge amount of fresh capital.

Boeing still profits from it’s standing in the U.S. economy and wide aircraft portfolio worldwide. It’s still a great company with very a diverse range of products. Together with a good return this was a good reason for investors to take up the bond offer, although the stock price itself dropped on Friday.