MW Boeing's bonds are again showing more confidence than the stock

By Ciara Linnane

Spreads on some of Boeing's long bonds widen just 2 basis points as the stock falls

Boeing Co.'s stock fell Monday in the wake of a deadly plane crash in South Korea, but the aerospace giant's bondholders seemed unfazed.

The stock $(BA)$ fell more than 5% before recouping some of those losses, after the Jeju Air plane crash on Sunday that killed 179 of the twin-engine Boeing 737-800 plane's 181 passengers who were traveling from Bangkok, Thailand.

The main movement came in the company's 7.008% bonds that mature in 2064, which saw spreads widen 2 basis points from last week. The subdued move came amid light trading volumes in the holiday-shortened week, as the following chart from data-solutions provider BondCliQ Inc. shows.

"The bottom line is the bond market doesn't seem too bothered," said one market source.

Client flows show net buying of the company's bonds by midmorning.

Boeing has faced mounting scrutiny this year after a panel blew off one of its 737 Max planes on Jan. 5, causing an Alaska Airlines $(ALK)$ flight to make an emergency landing in Portland, Ore.

The company, together with Europe's Airbus (FR:AIR) $(EADSY)$, makes most of the world's supply of narrow- and wide-body aircraft.

The Korean crash bookends a difficult year for Boeing, which has more than $57 billion of outstanding bonds but is loss-making after a series of production missteps, as well as a debilitating strike by machinists that ended in November.

With the threat of a downgrade of its credit that would send it into junk territory, Boeing won a reprieve when it raised about $21 billion in capital in late October, enough to cover its cash burn through the first half of next year and cover debt obligations coming due in 2025 and 2026.

Related: Boeing's bonds signal view that company has bought time with credit-raters to avoid slide to junk

Under new Chief Executive Kelly Ortberg, the company has pledged to cut staff, sell assets and wind down unprofitable programs as it works to get production fully back on track after the strike.

CreditSights analyst Matt Woodruff reiterated an outperform rating on the bonds in early December and predicted they would stabilize ratings at low BBB "and ultimately provide line of sight to ratings upgrades over the next several years."

For more, see: Boeing's volatile bonds could outshine the defense sector next year

The stock, meanwhile, is down 32% on the year, while the S&P 500 SPX has gained 24%.

Also read: 'We are at a low here, folks,' Boeing's new CEO tells employees. 'I'm tired of it.'

-Ciara Linnane

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December 30, 2024 13:03 ET (18:03 GMT)

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