*

Boeing ( BA ) considers issuing stock and equity-like securities

to

raise cash

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Investment banks have been building shadow books, fielding

investor inquiries

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Analysts estimate Boeing ( BA ) needs $10-$15 billion to maintain

credit ratings

By Shankar Ramakrishnan, Allison Lampert, Echo Wang, Mike

Stone

NEW YORK Oct 8 (Reuters) - Boeing ( BA ) is examining

options to raise billions of dollars through a sale of stock and

equity-like securities, two sources familiar with the matter

said, as the planemaker tries to avoid slipping in to junk

territory on its credit ratings.

In the past few weeks, Boeing ( BA ) has received pitches from

investment banks, including Goldman Sachs ( GS ), JPMorgan ( JPM )

, Bank of America ( BAC ) and Citigroup ( C/PN ), suggesting

various fundraising options, according to four sources familiar

with the matter.

These options include selling common stock as well as

securities such as mandatory convertible bonds and preferred

equity, according to the sources. One of the sources said they

suggested to Boeing ( BA ) that it should raise around $10 billion.

Such hybrid bonds can be treated as equity capital by rating

agencies, which means issuing them would not add to debt to the

same extent as selling bonds, while also being potentially more

favorable for existing shareholders.

Banks have also been building so-called shadow books,

sounding out interest from investors for such securities in case

Boeing ( BA ) decided to go ahead, the sources said. Some investors

have reached out to banks to tell them they were interested in

purchasing Boeing's ( BA ) preferred securities if they were issued,

two of the sources said.

Boeing ( BA ) and the investment banks declined to comment. The

sources, who requested anonymity as these conversations are

private, said Boeing ( BA ) had not decided whether to go ahead with

any of these options. It was not clear when it might make a

decision.

Last month, Boeing CFO Brian West told a Morgan Stanley ( MS )

conference that the company was "constantly evaluating our

capital structure and liquidity levels to ensure that we could

satisfy our debt maturities over the next 18 months while

keeping confidence in our credit rating as investment grade."

Maintaining an investment grade rating is crucial for the

planemaker, which has never fallen below that threshold. Ratings

can not only determine the cost of capital for a company, but

they also give it access to stable institutional investor money.

Boeing's ( BA ) finances have come under pressure since a Jan. 5

incident in which a door panel blew off a 737 MAX jet model in

mid-air led to slumping production of the jet. Then last month

its workers went on strike, further hitting production and

leaving it burning through cash.

The company has about $60 billion in debt and posted

operating cash flow losses of more than $7 billion for the first

half of 2024.

Analysts estimate that Boeing ( BA ) would need to raise somewhere

between $10 billion and $15 billion to be able to maintain its

ratings, which are now just one notch above junk.

Late last month, Moody's said the company had upcoming

commitments of $16 billion, and that a downgrade was possible if

it deemed any equity raise was inadequate relative to that. The

company has $11.5 billion of debt maturing through Feb. 1, 2026,

and is committed to issuing $4.7 billion of its shares to

acquire Spirit AeroSystems ( SPR ) and assume its debt.

Moody's, which has Boeing's ( BA ) Baa3 rating on review for a

downgrade to junk, declined to provide additional details.

Creditsights analyst Matt Woodruff estimated the company

needs to raise $12 billion to $15 billion to keep Moody's from

cutting its ratings into junk, especially if the strike extends

into this whole month.

It is not clear, however, whether any of the fundraising

options that involve raising cash through instruments other than

common stock would satisfy credit agencies.

S&P Global Ratings aerospace director Ben Tsocanos told

Reuters that issuing common equity would be better from a credit

standpoint.

"We would view preferred stock that had a required payment

as more debt-like and less supportive of the rating," he said.

S&P said on Tuesday it placed Boeing's ( BA ) rating on CreditWatch

negative, saying the planemaker will likely require incremental

funding.