(Bloomberg) — Boeing Co. is looking to issue around $8 billion of debt in as many as six parts, its first bond sale since the planemaker reported a quarterly loss and $3.9 billion of cash burn, and Moody’s Ratings cut the company’s credit rating to a step above junk.
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The company is looking to sell debt in maturities ranging from three to 40 years, according to a person with knowledge of the matter, who is not authorized to speak publicly. The 40-year portion may yield around 2.65 percentage points more than Treasuries, said the person, who asked not to be identified as they are not authorized to speak about it.
The deal could be around $8 billion, according to a separate person, however, the final size won’t be set until later on Monday.
Possible pricing ranges being discussed for the new offering suggest some of the bonds may be sold at yields more in line with junk bonds than investment-grade securities, but risk premiums on the securities may shrink before pricing is finalized. The average risk premium on a BB rated bond is around 1.83 percentage point, according to Bloomberg indexes. The BB index matures on average in about 5.1 years, while four of the six portions of the bonds the company is looking to sell on Monday have longer maturities.
Bill Zox, a portfolio manager at Brandywine Global Investment Management, said he expects the deal to get a warm reception from investors, “which may say more about strong demand for new issuance than the prospects for Boeing credit.”
Moody’s also has the company’s outlook at negative, and all three of the graders now have Boeing at a step above high yield.
Boeing Chief Financial Officer Brian West said last week during a conference call that he intends to protect the company’s investment-grade rating, and that the company still has access to $10 billion in untapped credit lines. He added that Boeing is monitoring its access to cash and believes it still has “significant market access” if it needs to supplement liquidity.
Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. are managing the bond deal, said the person. Citi, BofA and Wells Fargo declined to comment while JPMorgan didn’t respond to a request for comment.
A spokesperson for Boeing declined to comment and referred Bloomberg to comments from its CFO in the recent earnings call. West said Boeing is committed to managing its balance sheet in a “prudent manner” with the goal of prioritizing its investment grade rating.
Boeing has the tools to defend its investment-grade status and the negative outlooks from the ratings providers give the company at least 12 months of runway to show progress in normalizing operations and moving toward the FAA production limit, Bloomberg Intelligence analyst Matthew Geudtner wrote in a note Monday.
–With assistance from Brian Smith and Josyana Joshua.
(Updates with background on bond sale and credit ratings from second paragraph)
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