Boeing Company (BA)

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Boeing Seeking as Much as $10 Billion Amid Ongoing 737 Max Crisis
By: TheStreet | January 20, 2020

• Troubled airplane maker Boeing is in talks with several banks to secure some $10 billion or more in loans to offset 737 Max-related costs.

Embattled airplane maker Boeing (BA) is in discussions with several banks to secure some $10 billion or more in loans to offset costs stemming from a production halt of its grounded 737 Max jetliners following two fatal crashes.

Citing people familiar with the discussions, CNBC reported on Monday that the Seattle-based company has so far secured at least $6 billion from a group of banks, and is talking to other lenders about more.

CNBC said the loan Boeing is currently negotiating will likely be a delayed-draw loan, meaning Boeing can tap into it later, a move that may not immediately affect its credit rating.

Both Moody’s Investors Service and S&P in December downgraded Boeing’s credit rating, with Moody's going a step further last week saying its current 'A3' rating is on review due to the extended issues with the 737 Max.

Banks that have already committed to contribute to the loan include Citigroup (C), BoA Merrill Lynch (BAC), Wells Fargo (WFC) and JPMorgan Chase (JPM), CNBC said, citing sources.

The news follows reports earlier this month that Boeing had been in discussions with a group of unnamed banks about a potential loan, possibly structured as an investment-grade term loan, with Citigroup reportedly leading the talks.

Boeing signed new revolving credit facilities totaling $9.5 billion back in October, and almost doubled the size of its existing lender commitments, according to Bloomberg News.

The return of the 737 Max to the skies has faced several significant hurdles, including a new software issue disclosed by the company just last week. Boeing announced earlier this month that it was halting production of the 737 Max outright.

To be sure, analysts expect Boeing to take billions in charges. Canaccord analyst Ken Herbert was the latest analyst to cut his price target on Friday on what he expects to be at least a $5 billion charge to fourth-quarter earnings.

The charge could reflect changes to accounting block cost assumption as well as additional customer concessions, Herbert said in a research note to clients, leading to his more than $5 billion estimate. He cut his one-year price target to $350 a share from $370.

Boeing will release its fourth-quarter results on Jan. 29.

Shares of Boeing ended the trading day Friday down 2.36%, or $7.85 a share, at $324.15. U.S. markets were closed on Monday in observance of Martin Luther King day.

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