(Oct 29): Boeing Co raised around US$21 billion (RM91.77 billion) in an upsized share sale, one of the largest ever by a public company, shoring up its balance sheet as it burns through cash.
The planemaker sold 112.5 million common shares for US$143 each, according to a statement. The stock was priced at a discount of about 7.7% to its Friday closing price of US$155.01 each.
The company also sold US$5 billion of depositary shares that represent a 1/20th stake in mandatory convertible preferred shares, the statement said.
The infusion of funds clears one of new CEO Kelly Ortberg’s most urgent tasks. Boeing’s balance sheet was strained by years of turmoil and the fallout from a strike now in its seventh week that is crippling manufacturing of the company’s main cash cow, the 737 Max jetliner. Boeing needed the capital infusion to maintain its investment-grade rating and fund its production ramp-up once the walkout ends.
The company is on pace to use around US$4 billion in cash during the fourth quarter, which would bring its free-cash outflow to around US$14 billion for the year. The planemaker expects to continue burning cash through the first half of next year as it restarts its factories, including the 737 Max assembly lines.
The shares closed down 2.8% at US$150.69 each on Monday in New York. The stock has declined roughly 42% this year, the second worst performance in the Dow Jones Industrial Average.
Boeing factory workers voted last week to reject the company’s latest contract offer, which included a wage increase of 35% spread over four years. The company plans to cut its workforce by about 10%, Ortberg said in a memo to employees on Oct. 11.
The company on Oct 23 received clearance from the US Securities and Exchange Commission to sell as much as US$25 billion of equity and debt. Boeing also has a separate new credit agreement in place for US$10 billion, giving it “additional short-term access to liquidity as we navigate through a challenging environment”.
Ortberg is also considering options to streamline Boeing’s broad portfolio. He has launched a review of its businesses that the CEO expects to conclude by year-end. The company is weighing options for the future of its troubled Starliner space capsule program as part of the review, Bloomberg News has reported.
The underwriters have the option to sell an additional 16.9 million common shares and US$750 million in depositary shares.
Goldman Sachs Group Inc, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co led the capital raise, while Wells Fargo & Co., BNP Paribas SA, Deutsche Bank AG, Mizuho Financial Group Inc, Morgan Stanley, Royal Bank of Canada and SMBC Nikko also worked on the deal, the statement shows. PJT Partners Inc acted as Boeing’s financial adviser for the offerings.
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