By Allison Lampert and Matt Tracy
(Reuters) – Boeing on Monday tapped debt markets to raise $10 billion, after the U.S. planemaker burned $3.93 billion in free cash during the first quarter following slowing production of its best-selling jet, sources familiar with the matter said.
Boeing’s credit rating hovered above “junk” status last week after new action from rating agencies as the planemaker tries to recover from a crisis that began in January after a midair blowout of a cabin panel door plug on a nearly new 737 MAX 9.
Investors and analysts have said that Boeing could tap bond markets to get ahead of more than $12 billion in combined debt coming due in 2025 and 2026.
Credit rating agencies on Monday both assigned ratings nearing junk to Boeing’s new senior unsecured notes, with S&P assigning a BBB- rating and Moody’s assigning a Baa3 rating.
Moody’s said the rating reflects Boeing’s still-strong business profile, which continues to mitigate ongoing weak performance in commercial aircraft, although headwinds surrounding the division could persist through 2026.
Boeing will use the bond proceeds to increase its liquidity ahead of maturities on its existing debt load, including $4.3 billion in 2025, S&P wrote on Monday.
“It looks like it will go well,” said one of the sources, who was looking at buying the bonds, adding that he was told it was eight times oversubscribed.
The deal’s bookrunners leading the bond sale include Bank of America, Citi, JPMorgan and Wells Fargo, according to the deal’s term sheet.
Boeing, whose shares rose 3.4%, is pricing bonds that have maturities ranging from three to 40 years, according to the term sheet. The bonds were set to price with a premium of 10-15 basis points to Boeing’s outstanding bonds after, as strong demand during the sales period allowed Boeing to reduce the amount of concession offered, one banking source said.
The sharp tightening of spreads is reflective of overwhelming demand for the bonds, with order books earlier in the day said to have reached over $70 billion, two bank syndicate sources said.
Boeing declined to comment, but pointed to remarks from Chief Financial Officer Brian West during the company’s earnings last week in which he said the company was committed to managing its balance sheet in a prudent manner, with the goal of prioritizing its investment-grade rating and helping the factory and supply chain to stabilize.
(Reporting By Allison Lampert in Montreal and Matt Tracy in Washington; Additional reporting by Shivansh Tiwary and Shankar Ramakrishnan; Editing by Chris Sanders, Jonathan Oatis and Mark Porter)
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