Al Root

Boeing is raising money to heal its ailing balance sheet.

Repair will likely include a stock sale that dilutes investors' existing equity stakes. At this point, investors are likely fine with that.

Tuesday, Boeing filed plans with the Securities and Exchange Commission to raise up to $25 billion in cash through common stock, preferred stock, and debt sales.

The mix of securities offered isn't specified, and no new securities are being offered yet. The filing prepares for future offerings and this is the first shelf registration for Boeing since 2020. Still, Wall Street believes a $10 billion stock offering is likely sooner than later.

Along with an additional cash cushion, more equity will help preserve Boeing's investment-grade credit rating, something Boeing management has said repeatedly it is keen to defend.

Investors know a stock sale is likely. They don't appear shocked. Shares of the commercial aircraft maker were up 0.8% in premarket trading at $150.15 apiece, while S&P 500 and Dow Jones Industrial Average futures were close to flat.

Analysts estimate Boeing is using about $1.5 billion a month during its current labor strike. The company ended the third quarter with roughly $20 billion in total liquidity. It added another $10 billion in a new credit agreement, disclosed Tuesday.

"These are two prudent steps to support the company's access to liquidity," Boeing said in an emailed statement, adding that it has not drawn on an existing revolving credit facility.

The bigger issue than current liquidity, and even the strike, is Boeing's total debt level. It ended the second quarter with about $53 billion in long-term debt. Some $40 billion of that was accumulated following two tragic 737 MAX crashes in 2018 and 2019 and the Covid-19 pandemic.

Too much debt can become a competitive issue. Boeing rival Airbus ended the second quarter with about $10 billion in long-term debt. Boeing needs to get its debt levels under control so it can divert more cash to investment spending on new planes needed to compete with Airbus.

The shelf registration followed Boeing's Friday announcement that it would l ay off some 17,000 workers. While layoffs, the strike, and new capital are all, essentially, happening now, the layoffs and capital would be happening regardless of Boeing's labor situation.

Both things are steps being taken by new CEO Kelly Ortberg to turn around the company.

Coming into Tuesday trading, Boeing stock was down about 43% year to date. Shares were down about 40% since an emergency-door plug blew out of a 737 MAX 9 jet on Jan. 5 while it was in flight. That incident has led to slower production and more regulatory oversight.

Write to Al Root at allen.root@dowjones.com

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October 15, 2024 08:04 ET (12:04 GMT)

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