Boeing Sells $9.8 Billion of Bonds to Refinance Growing Debt

Boeing Co. sold $9.825 billion of bonds Tuesday, looking to refinance an over-levered balance sheet that swelled to keep money flowing in the pandemic.

The planemaker is borrowing to repay a portion of the $13.8 billion loan it drew down at the onset of the coronavirus outbreak, part of a borrowing spree that took its debt balance up to $63.6 billion by year end. It’s been able to call on bond investors time and time again, riding its way through one of the worst years in its century-long history amid a halt in global travel and the grounding of its best-selling plane.

Boeing issued the bonds in three parts, according to a person with knowledge of the matter. The longest portion of the offering, a five-year security that is noncallable for two years, will yield 175 basis points over Treasuries, after initially discussing around 195 basis points, said the person, who asked not to be identified as the details are private.

The company had been aiming to refinance about half of the borrowings under its $13.8 billion delayed draw two-year term loan credit facility, which it raised early last year amid the 737 Max crisis, a second person with knowledge of the matter said before the size of the bond sale was determined. The company drew on the full amount in March amid the start of the pandemic as travel shut down, calling into question whether airlines would keep paying for new planes.

The new debt offers additional protection to investors through what’s known as coupon steps, in which the interest rate increases by 25 basis points for each downgrade below investment grade. Boeing is rated one notch above junk at S&P Global Ratings and Fitch Ratings, while Moody’s Investors Service has it one level higher.

“We believe we currently have sufficient liquidity and are not planning to increase our debt levels,” Chief Financial Officer Gregory Smith said on an earnings call last week. “However, we will continue to actively manage our balance sheet, including refinancing debt maturities.”

Boeing declined to provide a 2021 earnings forecast when it reported fourth-quarter results. It burned $19.7 billion in 2020 and doesn’t expect to be cash-flow positive until next year.

Manufacturing flaws have hobbled deliveries of the 787 Dreamliner, and Boeing last week delayed the debut of its newest model, the behemoth 777X, to late 2023. That leaves the company dependent on deliveries of the 737 Max, its workhorse single-aisle jet, which was recently approved to fly again in much of the world after a long grounding that began in March 2019 following two deadly crashes.

Boeing last sold bonds in late October, raising $4.9 billion to help repay debt. It borrowed $25 billion in April, the largest bond sale of 2020, which it said at the time ruled out the need for further federal aid.

Bank of America Corp., Citigroup Inc., Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. managed the offering, the person said.

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