Investment-grade rating preserved? After burning 10 billion in the major strike, Boeing plans to raise 35 billion for "self-rescue"

After announcing a large layoff last week and forecasting the continued impact of strikes on its business, Boeing, facing tight liquidity, is preparing to raise as much as $35 billion to "rescue" itself.

On Tuesday, October 15th, Eastern Time, Boeing announced plans to raise up to $25 billion through issuing stocks and bonds. This is Boeing's effort to strengthen its balance sheet using the so-called shelf registration system.

Under U.S. securities regulations, under the shelf registration system, issuers can submit a registration statement to the U.S. Securities and Exchange Commission (SEC) before a public offering, indicating that they do not intend to immediately sell all registered securities, but rather allow issuers to make multiple issuances under the same effective registration, including both initial and subsequent issuances.

Boeing stated in the announcement:

"This general shelf registration provides flexibility for the company to seek various capital options as needed withinthree years** to support the company's balance sheet."

At the same time, Boeing also disclosed in another document that it has signed a "supplemental credit agreement" with some major banks to obtain a $10 billion loan, stating "this credit arrangement provides additional short-term liquidity for us to address a challenging environment. The company has not yet used this credit arrangement or its existing revolving credit."

It is currently unclear when Boeing plans to raise funds through stock and bond issuance within three years and the respective sizes. Sources told The Wall Street Journal that Boeing is expected to raise $10 billion through stock issuance. Analyst Ron Epstein of Bank of America released a report on Tuesday stating that Bank of America expects Boeing to first issue stocks, which should support the company's balance sheet in the short term, while retaining the option for future debt financing to reduce the risk of credit rating downgrade.

In April of this year, international credit rating agency Moody's downgraded Boeing's credit rating from Baa2 to Baa3, just one level above the so-called "junk" rating, and gave a negative rating outlook, indicating a potential downgrade to junk status. Subsequently, Wall Street analysts estimated that Boeing needs to raise $10 billion to $15 billion to maintain its rating and avoid falling into junk status.

While announcing a layoff of about 10% last Friday, Boeing also released preliminary financial data for the third quarter, expecting third-quarter revenue of $17.8 billion, a GAAP loss per share of $9.97, the largest quarterly loss in nearly four years, an operating cash flow loss of $1.3 billion, and cash and marketable securities investments of $10.5 billion as of the end of the quarter, meeting the minimum operational requirements.

Boeing stated that, partly due to the strikes, the initial delivery time of the first batch of 777X aircraft is expected to be delayed by one year to 2026. Due to the impact of strikes and other factors, the total pre-tax expenses for civil aircraft projects such as 777X amount to $6 billion. This is the first time Boeing has disclosed the impact on aircraft deliveries and financial conditions after a month-long strike by employees Since the strike, Boeing has "burned" $1 billion, with a net debt of $45 billion.

Last month, Moody's and two other international credit rating agencies, Fitch and S&P, warned that if the strike that began on September 13th continues for a long time, Boeing's rating may be downgraded.

Fitch said at the time that if the strike lasts one or two weeks, it is unlikely to affect the rating, but if it lasts longer, it may have a substantial impact on Boeing's operations and finances, increasing the risk of a downgrade. Moody's stated that if Boeing issues any stock while issuing bonds to meet liquidity requirements, including funding needed to repay approximately $12 billion in debt due by the end of 2026, its rating will be downgraded. S&P said that an extended strike could delay Boeing's recovery and harm its overall rating.

This Tuesday, both Fitch and S&P stated that issuing stocks and bonds could help Boeing maintain its investment-grade credit rating. Fitch stated that Boeing's statement on Tuesday would "increase financial flexibility and alleviate short-term liquidity concerns." S&P said, "Supplemental credit arrangements also seem to be a wise precaution."

However, some analysts are skeptical. For example, Nick Cunningham, an analyst at Agency Partners, believes that Boeing's shelf registration announcement is vague and broad, coupled with the necessity of interim financing, which means that banks may have difficulty promoting Boeing to potential investors or lenders. He has suspended his recommendation on Boeing's stock and target price.

After announcing financing plans and credit agreements, Boeing's stock rebounded this Tuesday, rising more than 2% against the market trend, performing the best among Dow components, with a cumulative decline of over 40% this year.