Boeing plans to sell shares to reduce $ 61 billion debt burden

Boeing (NYSE: BA) put questions about its viability to rest in April by raising $ 25 billion in new debt. Now that the 737 MAX is back in the air and airlines are slowly recovering, the company is considering selling shares to pay off some of that debt.

At an investment conference at Credit Suisse on Friday, Boeing CFO Greg Smith said the firm’s goal in the coming months would be to pay off some of its massive $ 61 billion debt. dollars. “As far as the deployment of capital, … it will be about paying down that debt. We will, of course, continue to invest in the company, but we have to reduce the debt balance. And we will seek every opportunity. to do it in the most efficient way, including fairness, ”Smith said.

The company has struggled since the March 2019 grounding of the 737 MAX, which drained free cash flow. Boeing’s net debt is now four times higher than it was before the grounding, and with airlines focusing on rebuilding their balance sheets once the pandemic is over, we’re unlikely to witness 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 recovering market. The stock is still down nearly 30% for the year, but rose 50% last month on positive signs that activity is improving.

Flying the new 737 MAX is a big part of Boeing’s business case, but other aircraft models 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 were behind production figures, wondering how long Boeing could afford to continue meeting its manufacturing targets for the aircraft. Boeing has already announced plans to shut down one of its two Dreamliner assembly lines, and the further reduction in production suggests the company doesn’t expect demand for the plane to pick up anytime soon.