Boeing Public Offerings: Boosting Liquidity Amid Financial Struggles

Boeing Launches Public Offerings of Common and Depositary Shares
Boeing's Official Announcement
Boeing has officially announced its plan to raise funds by offering 90 million shares of common stock and $5 billion in depositary shares. Goldman Sachs, BofA Securities, Citigroup, and JPMorgan are leading the deal as joint bookrunning managers for both offerings.
The company plans to use the net proceeds from the offerings for general corporate purposes, which may include repayment of debt, capital expenditures, additions to working capital, and funding and investments in the company's subsidiaries.
Details of the Offerings
Each depositary share represents a 1/20th interest in a share of newly issued Series A Mandatory Convertible Preferred Stock. Holders of the depositary shares will be entitled to a proportional fractional interest in the rights and preferences of the preferred stock, including conversion, dividend, liquidation, and voting rights.
Unless earlier converted, each share of preferred stock will automatically convert into a variable number of shares of common stock based on the applicable conversion rate. The dividend rate, conversion terms, and other terms of the preferred stock will be determined at the time of pricing of the offering of the depositary shares. Boeing intends to apply to list the depositary shares on the New York Stock Exchange under the symbol "BA.PRA."
Boeing's Financial Struggles
Boeing shares moved lower in premarket trading after a report revealed a capital raise could take place as soon as Monday. This move is aimed at preventing credit rating agencies from downgrading Boeing's investment-grade credit rating to speculative territory amid dwindling cash reserves and a drawn-out strike.
According to three sources familiar with the matter, the airplane maker could raise as much as $15 billion, with the amount subject to change based on demand. Boeing's advisers have been working on a funding deal for several weeks.
Previous Attempts to Boost Liquidity
In the past, Boeing has considered various strategies to improve its liquidity. These include considering $10 billion in new shares, filing a $25 billion shelf registration, and exploring asset sales. The company's latest move involves a transaction likely consisting of a combination of common shares and a mandatory convertible bond.
Analysts from JPMorgan estimate that Boeing will lose $1.5 billion each month if workers continue to strike. Three major rating agencies have warned that the strikes could downgrade Boeing's investment-grade credit rating to speculative territory, also known as 'junk.'
Last month, Boeing's CFO Brian West assured analysts that the company would take any necessary actions to preserve its investment-grade rating and strengthen its balance sheet.
Analysts' Predictions
Analysts Noah Poponak and Anthony Valentini from Goldman Sachs recently suggested that Boeing might raise $12 billion of equity before the year ends. This would match the total maturities due in 2025 + 2026 and keep the cash balance well above $10 billion in the near-to-medium-term while the company ramps up commercial deliveries and strives to resolve defense profitability.
According to Bloomberg, Boeing needs the capital infusion to maintain its investment-grade rating and fund its recovery from a crippling strike. The company is on pace to use around $4 billion in cash during the fourth quarter, which would bring its free-cash outflow to around $14 billion for the year. The planemaker expects to continue burning cash through the first half of next year as it restarts its airplane factories, including the assembly lines for its cash-cow 737 Max jetliner.
Bottom Line
Boeing's decision to offer common and depositary shares is a strategic move to boost its liquidity and maintain its investment-grade rating. The company's financial struggles have been exacerbated by ongoing worker strikes and dwindling cash reserves. While the success of this capital raise remains to be seen, it's clear that Boeing is committed to taking necessary actions to protect its financial stability.
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