By Abhijith Ganapavaram and Utkarsh Shetti
(Reuters) -Boeing set out to shore up its sagging finances on Tuesday, announcing plans to raise up to $25 billion through stock and debt offerings and a $10 billion credit agreement with major lenders amid a production and regulatory crisis.
It was not clear when and how much the planemaker would eventually raise via the offering, but analysts estimate that Boeing (NYSE:BA) would need to raise somewhere between $10 billion and $15 billion to be able to maintain its credit ratings, which are now just one notch above junk.
The company is grappling with a slump in production of its best-selling 737 MAX jet following a mid-air door panel blowout earlier this year and a strike by thousands of union workers since Sept. 13.
Boeing said on Tuesday it had not drawn on the new $10 billion credit facility arranged by BofA, Citibank, Goldman Sachs and JPMorgan, or its existing revolving credit facility.
“These are two prudent steps to support the company’s access to liquidity,” Boeing said, adding that the potential stock and debt offerings will provide options to support its balance sheet over a three-year period.
The company’s shares were up 1.6%.
S&P Global and Fitch had warned of a downgrade last month. The ratings agencies said on Tuesday that the stock and debt offerings could help preserve Boeing’s investment-grade rating.
“The supplemental credit facility also seems like a sensible precaution,” S&P Global’s Ben Tsocanos said.
However, some analysts were not convinced.
“We take the vagueness and breadth of the shelf announcement and the need for the temporary financing as implying that the banks are struggling to sell this issue to potential investors or lenders,” Agency Partners analyst Nick Cunningham said.
The offering was too big for immediate liquidity needs or not big enough to permanently refinance the company, Cunningham noted, adding that it may imply short-term liquidity is worse than thought.
Cunningham suspended his recommendation and price target for Boeing’s shares.
On Monday, Emirates Airlines President Tim Clark became the first senior industry figure to articulate fears over Boeing’s ability to tackle its worst-ever crisis intact.
“Unless the company is able to raise funds through a rights issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon,” Clark told the Air Current, an aviation industry publication.
Boeing will use the funds for general corporate purposes, according to paperwork filed with the U.S. markets regulator on Tuesday.
The planemaker had cash and cash equivalents of $10.89 billion as of June 30.
STRIKE COSTS
The strike is costing the company more than $1 billion per month, according to one estimate that was released before Boeing announced it will cut 17,000 jobs or 10% of its global workforce.
The company and the Machinists union, which represents about 33,000 striking workers in the U.S. Pacific Northwest, are yet to reach an agreement over a new contract and talks have become increasingly heated.
U.S. Acting Labor Secretary Julie Su met with Boeing and the union in Seattle on Monday in a bid to break the deadlock.
The planemaker was already reeling due to a regulator-imposed cap on production of its MAX jets after the mid-air cabin-panel blowout in January.
Boeing has $11.5 billion of debt maturing through Feb. 1, 2026, and has committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems (NYSE:SPR) and assume its debt.
Reuters reported earlier this month Boeing was examining options to raise billions of dollars through a sale of stock and equity-like securities.
Boeing delivered 33 jets in September, down from 40 in August, as it slipped further in the delivery race with rival Airbus.