Boeing to Sell $5.5 Billion of Bonds for Brazil Embraer JV
(Bloomberg) -- Boeing Co. is selling $5.5 billion of bonds to help finance its joint venture with Embraer SA as the companies seek to build smaller commercial planes together.
The airplane manufacturer is selling senior unsecured bonds in six parts, according to a filing Monday. The longest portion of the offering, a 40-year security, will yield 1.4 percentage points more than Treasuries, after initially discussing around 1.55 percentage points, according to a person with knowledge of the matter, who asked not to be identified as the details are private.
The bond sale comes as Boeing faces the fallout of a global grounding of its 737 Max plane. Boeing said last week it will consider slowing or even temporarily halting production of the 737 Max, the company’s most important jetliner, if a global flying ban drags on longer than anticipated. The company this month also revealed a $4.9 billion after-tax charge to compensate airlines and lessors.
The bond offering should carry attractive concessions despite expectations of tightening from the initial price talk, CreditSights analysts led by Ashwin Tiruvasu wrote in a note Monday. They maintained their outperform recommendation on the planemaker’s debt, noting that they view downside risk already priced in at current secondary levels.
Embraer, based in Brazil, received approval from its shareholders in February for the joint venture with Boeing, which is expected to help the two companies better compete with Airbus SE. The joint venture is on track to close by the end of this year, Boeing Chief Executive Officer Dennis Muilenburg said on a July 24 earnings call.
The grounding of its best-selling jet has put Boeing’s credit rating at risk. Both Moody’s Investors Service and Fitch Ratings cut their outlooks to negative last week. S&P Global Ratings wrote in February that it was keeping its BBB rating on Embraer on credit watch with negative implications because of the complexity of the transaction and the large number of stakeholders involved.
JPMorgan Chase & Co., Barclays Plc, Royal Bank of Canada, Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc., Deutsche Bank AG, Wells Fargo & Co., Credit Suisse Group AG, Sumitomo Mitsui Financial Group Inc., Morgan Stanley, Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. are managing the bond sale, according to the filing.
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