(May 6, 2020) - Boeing Co. has closed a $25 billion note offering as part of the aerospace company’s response to operational challenges and liquidity concerns caused by the coronavirus pandemic.
Boeing Co. Form 424B2, 2020 WL 02091557 (May 1, 2020).
The manufacturer of commercial airplanes and defense, space and security systems sold seven series of notes with values ranging from $2 billion to $5.5 billion, according to a prospectus supplement filed May 1 with the Securities and Exchange Commission.
The notes have interest rates ranging from 4.5% to 5.9%. The notes with the shortest term mature in 2023, while those with longest term mature in 2060.
Boeing provided no details on how it plans to use the proceeds from the offering, except to say the funds are for general corporate purposes.
It closed the offering May 4.
Boeing’s prospectus highlighted various risks from COVID-19 to its business, including reduced demand for its products and services, increased supply-chain instability and challenges to the ongoing viability of some customers.
The company said it is also facing other challenges, such as “[protecting] employee health and safety, production site shutdowns, workplace disruptions and restrictions on the movement of people, raw materials and goods.”
Boeing was forced to suspend operations at some facilities for the first time ever and many of its suppliers have also halted their operations, the prospectus supplement said. These actions have significantly increased the costs of meeting the company’s contractual commitments and will likely continue to halt its deliveries, the company warned.
Additionally, Boeing said the pandemic has had a significant effect on its liquidity.
The company expects these effects to continue until it is able to resume deliveries and said it may need to obtain additional financing to fund its operations and obligations, according to the filing.
With the indefinite reduction in commercial air traffic caused by the pandemic, Boeing may return to the debt markets sooner rather than later to shore up its cash position.