BA Boeing Co

By Doug Cameron 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 1, 2020).

Boeing Co. has lined up at least $12 billion in bank loans and may tap the commercial paper market to counter the cash drain from the 737 MAX crisis.

The aerospace giant said in a regulatory filing that it expects to close a two-year loan in February after securing bank commitments, and has the option to increase the facility if it is oversubscribed.

The planned loan would help fund compensation for buyers of the grounded jet and support Boeing suppliers after the company halted production of the MAX. The added funds would also pay for Boeing's stock dividend, which it opted to keep at existing levels this year.

The aircraft maker ended 2019 with $10 billion in cash, a level of liquidity that Boeing has maintained in recent years, tapping the bond market twice last year and doubling the size of its revolving loan facility.

"We believe our ability to access external capital resources should be sufficient to satisfy existing short-term and long-term commitments and plans," the company said in the filing.

Boeing's planning assumes it will secure regulatory approval for the MAX to re-enter commercial service by midyear, with assembly of the planes resuming about two months prior.

If the timetable holds, suppliers estimate Boeing will be able to produce about 200 new jets this year.

Boeing said it will take about a year to hand over the 400 planes that are built and in storage, though some airlines and leasing companies view that as optimistic. Another 380 planes that had been flying before the grounding nearly a year ago will have to be restored to service condition.

While Boeing's long-term credit ratings were downgraded by agencies over the past few weeks as MAX costs spiraled, short-term ratings for the company were largely left unchanged, maintaining its access to the bank market.

The planned new loan is a so-called delayed draw facility, which gives Boeing more flexibility than a bond issue in terms of the level of borrowing and repayment.

Charges and additional costs linked to the MAX, grounded by regulators since March following two fatal crashes, now top $19 billion.

While Boeing has collected a $500 million insurance payout, it said in the filing that there was no guarantee that other policies would entirely cover any cost from the multiple lawsuits it faces from families of the 346 who died in the two crashes, as well as expenses tied to legal action from some customers.

Boeing also faces a $4.2 billion payment to take a majority stake in the jetliner arm of Brazil's Embraer SA, a transaction it aims to complete by midyear. One of last year's bond issues was earmarked for the deal, which has yet to clear a regulatory review by the European Union.

There are other potential bills.

The company said it may have to finance some new jetliner deliveries this year or provide temporary funding to airlines, though it remained bullish on alternative external sources.

Boeing said in the filing that such financing commitments -- where it is effectively paying for jets on behalf of customers -- fell to $419 million last year from $601 million in 2018, though aircraft deliveries more than halved in the same period.

It has also earmarked $4 billion for 2020 and 2021 to cover unexpected costs relating to MAX production, including support for suppliers.

The company disclosed the scale of two non-MAX charges, including $148 million linked to higher costs on the KC-46A military refueling tanker. It also took a $293 million to write off goodwill attached to its Aviall services business.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

February 01, 2020 02:47 ET (07:47 GMT)

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