Shares in Boeing Co (BA) fell after the ailing planemaker said it raised $25 billion in debt financing and told investors that as a result it would not need to tap capital markets or the U.S. government for additional funding for now.
The planemaker’s stock dropped 5.4% to $133.37 in U.S. trading on Friday, taking its year-to-date plunge to 60%. The bond offering included debt instruments with an aggregate principal amount of $25 billion across seven tranches with maturities ranging from three to 40 years.
“The robust demand for the offering reflects strong support for the long-term strength of Boeing and the aviation industry,” Boeing said in a statement. “As a result of the response, and pending the closure of this transaction expected May 4, we do not plan to seek additional funding through the capital markets or the U.S. government options at this time.”
The Chicago-based company said it will use net sale proceeds for general corporate purposes.
The coronavirus pandemic-related travel restrictions and stay-at-home orders have brought the airline industry to an almost complete halt and caused production disruptions, which in turn have put pressure on Boeing’s cash flow.
“We expect negative operating cash flows in future quarters until deliveries resume and ramp up, and we will need to obtain additional financing in order to fund our operations and obligations,” Boeing said in a regulatory filing.
The aerospace company said last week that it plans to cut 10% of its workforce and announced reductions in its plane production rates as it braces for years-long industry recovery from the aviation industry crisis.
TipRanks data shows that overall Wall Street analysts have a Moderate Buy consensus rating on Boeing’s stock based on 13 Holds and 6 Buys. The $183.11 average price target foresees 37% upside potential in the shares in the next 12 months. (See Boeing’s stock analysis on TipRanks).
As of the end of March, Boeing had $15.5 billion in cash and marketable securities after burning through $4.7 billion in the quarter, mainly reflecting the impact of the 737 MAX grounding and COVID-19.
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