(Bloomberg) — Boeing Co. has received about $77 billion in orders for its first bond sale since the plane maker reported a quarterly loss and $3.9 billion in cash burn, and Moody's Ratings downgraded the company's credit rating to one step above junk.
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The company is raising $10 billion with maturities ranging from three to 40 years, according to a person with knowledge of the matter who is not authorized to speak publicly. The 40-year portion will yield 2.25 percentage points more than Treasuries, the person said, following previous discussions of about 2.65 percentage points.
The warm reception the deal is getting from investors “may say more about the strong demand for new issues than it does about the prospects for Boeing credits,” said Bill Zox, portfolio manager at Brandywine Global Investment Management.
Moody's also has a negative outlook for the company, and all three graders now have Boeing at one step above high yield.
Brian West, Boeing's chief financial officer, said on a conference call last week that he plans to protect the company's investment-grade rating, and that the company still has access to $10 billion in unused credit lines. He added that Boeing is monitoring its access to cash and believes it still has “significant market access” if it needs to replenish liquidity.
Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. manage the bond deal, the person said. Citi, BofA and Wells Fargo declined to comment, while JPMorgan did not respond to a request for comment.
A Boeing spokesperson declined to comment and referred Bloomberg to the CFO's comments in the recent earnings call. West said Boeing is committed to managing its balance sheet in a “prudent manner,” with the goal of prioritizing its investment grade rating.
Boeing has the resources to defend its investment-grade status, and the rating providers' negative outlook gives the company at least 12 months to demonstrate progress in normalizing operations and moving toward the FAA production cap, wrote Bloomberg Intelligence analyst Matthew Geudtner in a note on Monday.
–With help from Brian Smith and Josyana Joshua.
(The headline, first and third paragraphs have been updated to include details of investor demand and to reflect that the size has been set.)
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