Boeing plans to sell stock to reduce its $61 billion debt burden
Boeing (NYSE:BA) ended questions about its viability in April by raise $25 billion in new debts. Now, with the 737 MAX flying again and Airlines companies is slowly recovering, the company plans to sell issued shares to pay off some of this debt.
At a Credit Suisse investment conference on Friday, Boeing chief financial officer Greg Smith said the company would focus in the coming months on paying off some of its massive $61 billion debt. . “In terms of capital deployment, … it will be about paying down that debt. We will, obviously, continue to invest in the business, but we need to reduce that debt balance. do it in the most efficient way, including fairness,” Smith said.
The company has struggled since the grounding of the 737 MAX in March 2019, which drained free cash flow. Boeing’s net debt is now four times higher than it was before the grounding, and with airlines focused on rebuilding their balance sheets once the pandemic is over, we are unlikely to see to an increase in new aircraft sales over the next few years.
If Boeing decides to make a secondary offer, it will sell in a rising market. The stock is still down nearly 30% for the year, but has rebounded 50% in the past month on positive signs that activity is improving.
The 737 MAX flying again is a big part of the bull’s case for Boeing, but other aircraft designs continue to struggle. Production of the 787 Dreamliner, already slated to drop from 10 per month to six per month by mid-2021, will instead be reduced to five cells per month due to lukewarm demand.
In October, we noted that 787 deliveries lagged behind production figures, wondering how long Boeing could afford to continue meeting its manufacturing goals for the plane. Boeing has already announced its intention to closes one of its two Dreamliner assembly linesand the new production cut suggests the company doesn’t expect demand for the plane to pick up anytime soon.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.