Boeing raises $25bn in bond sale, helping it avoid government aid

Boeing Co raised $25bn in a bond offering on Thursday, a blowout result for the United States planemaker, which it said helped the company avoid taking government aid during the coronavirus-induced travel downturn.

Boeing’s capital raise, first reported by Reuters news agency earlier this week, is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data.

The Federal Reserve’s intervention in the credit market, which has included slashing interest rates to zero and pledging to buy corporate bonds if needed, has boosted prospects for troubled borrowers such as Boeing.

Earlier this week, Boeing was hoping to raise between $10bn and $15bn in the bond offering, but increased the size of the deal to $25bn due to the strong investor demand, according to people familiar with the matter.

Demand was stoked by high yields relative to Boeing’s other bond issues, Boeing’s earnings report on Wednesday and provisions in the offering that protect investors in case of a credit rating downgrade to junk status.

Following the bigger-than-expected bond offering, Boeing, which had been weighing seeking government aid, said it had no further plans to raise funds.

“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 US government options at this time,” Boeing said in a statement.

“We will continue to assess our liquidity position as the health crisis and our dynamic business environment evolve,” the company added.

Chicago-based Boeing sold seven new bonds with maturities ranging from 2023 to 2060. The new funds came at a higher price for Boeing than prior bond offerings with Boeing adding a provision to protect investors against a potential downgrade in its bonds to junk status.

S&P on Wednesday lowered its credit rating for Boeing to BBB-minus, one step above junk.

Boeing said this week it would cut its 160,000-person workforce by about 10 percent, further reduce 787 Dreamliner production and try to boost liquidity as it prepares for a years-long industry recovery from the pandemic, which drove its second consecutive quarterly loss.

The 737 MAX jet is expected to remain grounded at least until August due to software issues, people briefed on the matter told Reuters on Tuesday.

Credit rating agency Moody’s Investors Service Inc estimated this month that Boeing’s funding needs could top $30bn in 2020. The company secured about half of this by drawing down on a $13.8bn credit line in March, Moody’s said.

Boeing had faced a May 1 deadline set by Treasury to seek priority funding from a $17bn fund for national security-related companies. A Treasury spokeswoman declined to comment on Boeing’s decision to forgo aid.

US President Donald Trump has repeatedly promised to provide financial assistance to Boeing. The company in March had said it backed $60bn in government loans and loan guarantees for the entire aviation industry and its chief financial officer had warned the “markets essentially” were closed to Boeing.

The planemaker has been trying to bring its 737 MAX jet back into service after two fatal crashes, while the coronavirus pandemic has hammered aviation and other industries. Business shutdowns around the world to curb the outbreak have dried up demand for air travel.

Airlines in the US have seen a nearly 95-percent drop in US passengers and have slashed flight schedules. They are now working to reassure customers about the safety of air travel by instituting new cleaning and social-distancing procedures.

Three of the largest four US airlines said on Thursday they will require passengers to wear facial coverings on US flights, joining JetBlue Airways Corp in taking the step to address the spread of the coronavirus and convince reluctant passengers to resume flying.

United Airlines, Delta Air Lines Inc and American Airlines Group Inc, along with the smaller Frontier Airlines, announced they will require facial coverings from next month.

Delta and United’s new rules start on May 4, while Frontier’s start on May 8 and American’s requirements begin on May 11. The policies exempt young children from wearing masks or other facial coverings.

Many US airlines are also requiring pilots and flight attendants to use facial coverings while on board the aircraft.

United on Thursday posted a first-quarter loss of $1.7bn, including charges against investments in Latin America that have soured as the coronavirus pandemic jolts travel industries worldwide.