Boeing weighs options for raising cash as ratings downgrade looms, sources say

By Shankar Ramakrishnan, Allison Lampert, Echo Wang and Mike Stone

NEW YORK (Reuters) - Boeing is examining options to raise billions of dollars through a sale of stock and equity-like securities, two sources familiar with the matter said, as the planemaker tries to avoid slipping in to junk territory on its credit ratings.

In the past few weeks, Boeing has received pitches from investment banks, including Goldman Sachs, JPMorgan, Bank of America and Citigroup, suggesting various fundraising options, according to four sources familiar with the matter.

These options include selling common stock as well as securities such as mandatory convertible bonds and preferred equity, according to the sources. One of the sources said they suggested to Boeing that it should raise around $10 billion.

Such hybrid bonds can be treated as equity capital by rating agencies, which means issuing them would not add to debt to the same extent as selling bonds, while also being potentially more favorable for existing shareholders.

Banks have also been building so-called shadow books, sounding out interest from investors for such securities in case Boeing decided to go ahead, the sources said. Some investors have reached out to banks to tell them they were interested in purchasing Boeing’s preferred securities if they were issued, two of the sources said.

Boeing and the investment banks declined to comment. The sources, who requested anonymity as these conversations are private, said Boeing had not decided whether to go ahead with any of these options. It was not clear when it might make a decision.

Last month, Boeing CFO Brian West told a Morgan Stanley conference that the company was "constantly evaluating our capital structure and liquidity levels to ensure that we could satisfy our debt maturities over the next 18 months while keeping confidence in our credit rating as investment grade."

Maintaining an investment grade rating is crucial for the planemaker, which has never fallen below that threshold. Ratings can not only determine the cost of capital for a company, but they also give it access to stable institutional investor money.

Boeing's finances have come under pressure since a Jan. 5 incident in which a door panel blew off a 737 MAX jet model in mid-air led to slumping production of the jet. Then last month its workers went on strike, further hitting production and leaving it burning through cash.

The company has about $60 billion in debt and posted operating cash flow losses of more than $7 billion for the first half of 2024.