Boeing (BA) is experiencing a flurry of financial activity this week, demonstrating a strategic maneuver to strengthen its financial position amid significant challenges.
The company has inked a $10 billion supplemental credit agreement with a consortium of prominent banks, including Bank of America, Citibank, Goldman Sachs, and JPMorgan, who will act as joint lead arrangers and bookrunners. This credit facility provides Boeing with much-needed financial flexibility as it navigates ongoing economic headwinds. The terms of the agreement include a 0.5% funding fee on each advance and a duration fee ranging from 0.50% to 1.00% on outstanding advances after a specific period. Interest rates vary based on the type of loan, with non-SOFR loans accruing interest at the higher of Citibank’s base rate, the federal funds rate plus 0.50%, or Adjusted Term SOFR plus 1.00%, further adjusted based on Boeing’s credit rating. SOFR loans, on the other hand, will bear interest at Adjusted Term SOFR plus 1.375%-2.00%. Commitments under the agreement expire in 120 days, with advances maturing within 364 days. The credit agreement also imposes certain restrictions on Boeing’s financial activities, limiting its debt to 60% of total capital and restricting liens to $250 million. Additionally, it stipulates that mergers are permitted only if Boeing remains the surviving entity.
Simultaneously, Boeing disclosed a mixed shelf offering of up to $25 billion, encompassing Senior and Subordinated Debt Securities, Common Stock, and Preferred Stock. This offering provides Boeing with an additional avenue to raise capital and manage its financial obligations.
It’s worth noting that these financial maneuvers come on the heels of Boeing’s recent announcement of a 10% workforce reduction, impacting approximately 17,000 jobs. This move reflects the company’s efforts to address mounting financial losses and streamline operations.
For investors looking to gain exposure to Boeing and the aerospace industry, the IShares U.S. Aerospace & Defense ETF (ITA) and Gabelli Commercial Aerospace and Defense ETF (GCAD) offer potential avenues for diversification.
Shares of Boeing (BA) are currently trading higher in the premarket, reflecting investor sentiment surrounding these recent developments.