Oct 29, V7N- Boeing (BA.N) has announced a significant stock offering aimed at raising up to $24.3 billion to strengthen its finances, which have been strained by a more than six-week strike involving around 33,000 factory workers. The strike has halted production of several key aircraft, including the profitable 737 MAX, exacerbating Boeing's financial challenges.
 
The company revealed that it is offering 112.5 million shares of common stock, an increase from the previously announced 90 million, along with $5 billion in mandatory convertible securities. The stock offering has been priced at $143 per share, representing a 7.75% discount to its closing price of $150.69 on Friday. Without options for underwriters to purchase additional shares, the offerings are projected to raise about $21.1 billion.
 
Ben Tsocanos, an aerospace director at S&P Global Ratings, noted that this offering could positively impact Boeing's credit quality, especially given the context of ongoing negative free cash flow. Boeing has maintained an investment-grade credit rating thus far, but prolonged labor disruptions could jeopardize this status, increasing its capital costs.
 
The company has faced additional difficulties, including a regulator-imposed cap on production of its MAX jets following a mid-air incident in January. Labor strikes and production issues have contributed to cash burn, with Boeing reporting a substantial $6 billion loss for the third quarter. Analysts estimate that the strike is costing Boeing over $1 billion per month, prompting the company to announce plans to cut 10% of its workforce.
 
In conjunction with this offering, Boeing recently secured a $10 billion credit agreement with banks and aims to raise up to $25 billion through various equity and debt offerings. S&P has warned that a downgrade could occur if Boeing's cash balance dips below $10 billion or if the company needs to increase leverage to meet upcoming debt obligations. As of September 30, Boeing reported cash and marketable securities totaling $10.5 billion, with $11.5 billion in debt maturing before February 2026. The company is also committed to issuing $4.7 billion in shares to acquire Spirit AeroSystems and take on its debt.
 
Boeing intends to utilize the proceeds from this stock offering for general corporate purposes, which may include debt repayment. The ongoing labor strike has led to a stalemate in negotiations, with workers rejecting an improved contract that fell short of their demands for a 40% wage increase and the reinstatement of a defined-benefit pension plan.
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