Beleaguered Boeing Launches $22 Billion Share Offering

On Monday, Boeing announced the launch of concurrent separate underwritten public offerings of 90 million shares of common stock, par value $5.00 per share, and $5 billion of depositary shares.

If the primary offering is oversubscribed, the company has an option to issue 13.5 million shares more and can increase the mandatory convertible offering by another $750 million. Based on the closing price on Friday, Boeing could raise $13.95 billion from the common stock offering and an additional $2.1 billion if the issue is oversubscribed.

In a filing with the New York Stock Exchange, Boeing said it intends to use the net proceeds for general corporate purposes, which may include, among other things, repayment of debt, additions to working capital, capital expenditures, and funding and investments in the company’s subsidiaries.

Each share of Preferred Stock will automatically convert for settlement on or about October 15, 2027, into a variable number of shares of Common Stock based on the applicable conversion rate, and each Depositary Share will automatically convert into a number of shares of Common Stock equal to a proportionate fractional interest in such shares of Common Stock.

The dividend rate, conversion terms and other terms of the Preferred Stock will be determined at the time of pricing of the offering.

Boeing on the brink

Just last week, the company said it posted a loss of $6.17 billion for the quarter – its second-worst quarter ever – and that it burned $1.96 billion cash. The company’s total debt had reached $58 billion.

A worker’s strike, supported by over 33,000 employees, is now in its seventh week and the Union had rejected Boeing’s new job contract last Wednesday.

Delivery delays are getting some of Boeing’s biggest clients irate, with Emirates president Sir Tim Clark recently fearing that the Seattle company was headed for bankruptcy.

In an interview with The Air Current, Clark said: “Unless the company is able to raise funds through a Rights issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon.”

At the Dubai Airshow in November last year, Emirates placed a $52 billion order with Boeing for 95 additional wide-body aircraft, taking its total order book to 295 aircraft.

The move is expected to boost Boeing’s battered finances, and preserve its investment-grade credit rating. The company has never fallen below the investment-grade rating.

Ben Tsocanos, aerospace director at S&P Global Ratings, was quoted by Reuters as saying: “The offering is certainly favourable for credit quality. We will factor it into our assessment of the rating in the context of continued negative free cashflow.”

Boeing shares have been battered over the last few years, following two fatal crashes of its Max aircrafts, a mid-air blown-off door panel, botched first-ever manned trip to the International Space Station, and now the prolonged strike.

On Monday, it closed at $155.01 and was down to $150.69 in after hours. It started the year at $251.76, which is down 38.4 percent this year itself. Over a five-year period, the stock has fallen from its high of $371.34 on 22 November, 2019.