Boeing Co. is planning to raise more than $15 billion in capital to boost its liquidity. The company has not performed well for a few years as it struggled financially and also faced protests from the workers section. As per the Bloomberg report, the company plans over $15 billion capital hike from the fundraising. Boeing’s advisers have been contacting potential investors for the offering. The transaction will include shares as well as debt that can be converted into equity.
On October 23, the US Securities and Exchange Commission gave clearance to the company to sell the equity worth $25 billion. This will help Boeing to hold on to its falling credit rating. The deliberations are in process but the timings are still not confirmed.
According to a Bloomberg report, a $15 billion share sale would mark the largest equity offering since SoftBank Group Corp. sold a portion of its stake in T-Mobile US Inc. back in 2020.
Boeing Capital Hike- Inside the Financial Challenges
Boeing needs a capital hike to maintain its investment-grade rating and strengthen its recovery from a strike that has lasted now for more than seven weeks. In the fourth quarter, Boeing is expected to use almost $4 billion in cash, bringing its total cash outflow for the year to $14 billion. The company is planning to spend heavily through the first half of 2025 as it will be restarting its airplane factories, which includes the assembly lines for its popular 737 Max jet.
Still, things are not going well for Boeing as the factory workers voted against the company’s offer to increase 35% wage over a period of four years. Kelly Ortberg, CEO of Boeing mentioned in a memo to staff on October 11, “The company plans to reduce its workforce by about 10%, which will affect the executives, managers, and other employees.
Earlier this month, there were reports that Boeing was planning to raise at least $10 billion by selling new stocks. Boeing was also working with advisors for more options. Ronald Epstein, Corporate Analyst at Bank of America estimated on October 23 that the company would raise between $18 billion and $20 billion.
There have been several reports and estimations of the capital hike. On October 15, Boeing stated that it had a new credit agreement instead of $10 billion which gave, “additional short-term access to liquidity as Boeing navigates through a challenging environment.”
On October 23, Arlington, a Virginia-based company announced its third quarter result revealing revenue of $17.8 billion, which is much lower than expected. Additionally, both of its largest divisions reported having large amounts of loss. Boeing shares have dropped by 40% in this year only.
As per the Bloomberg reports, Boeing is exploring ways to streamline its diverse portfolio, with Ortberg initiating a review of its businesses that he aims to complete by the end of the year. This review will also consider the future of the struggling Starliner space capsule program. Earlier this month, Reuters reported that Boeing plans to raise approximately $15 billion through stock offerings and convertible bonds.
