The tails of Boeing 737 MAX aircraft are seen parked at Boeing facilities at the Grant County International Airport in Moses Lake, Washington, September 16, 2019.
Lindsey Wasson | Reuters
Boeing is talking to banks about borrowing $10 billion or more, according to people familiar with the matter, as the company faces rising costs stemming from two fatal 737 Max crashes.
The company has secured at least $6 billion from banks so far, the people said, and is talking to other lenders for more contributions.
Boeing has been grappling with the cash-sapping fallout of the two crashes — one in Indonesia in October 2018 and another in Ethiopia in March last year — that killed all 346 people aboard the two flights.
The company is suspending production of the planes this month as the grounding stretches into its 11th month. The return of the jets has faced several hurdles, including a new software issue disclosed by the company last week.
Boeing declined to comment.
Moody’s Investors Service last week said it was putting Boeing’s credit rating, which is investment grade, on review due to the Max issues.
“Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, and an ensuing period of heightened operational and financial risk, even if certification of the Max comes relatively near-term, as expected,” wrote Jonathan Root, Moody’s lead Boeing analyst.
The loan Boeing is negotiating will likely be a delayed-draw loan, meaning Boeing can tap into it later, a move that may not immediately affect its credit rating as another type of loan or a bond would, according to one of the people familiar with the matter.
Banks that have already committed to contribute to the loan include Citigroup, Bank of America Merrill Lynch, Wells Fargo and J.P. Morgan, people familiar with the matter said.
Boeing this month will pause production of the planes, which had been its best-selling aircraft. That decision is hurting its supply chain. Spirit AeroSystems, which makes fuselages and other parts for the 737 Max, said earlier this month it would lay off 2,800 workers.
Moody’s downgraded Spirit to junk territory last week, saying it “reflects our expectation that Spirit’s liquidity profile will quickly and materially erode in the absence of mitigating developments that remain largely out of the company’s control.”
The 737 Max issues have cost airlines more than $1 billion in lost revenue, and Boeing took a $5.6 billion pre-tax charge last July to compensate its Max customers for the grounding.
While the company has reached compensation agreements with airlines including American and Southwest, that applies to revenue lost in 2019 and analysts expect Boeing will have to pay more without a firm date to get the planes back in the air.
Investors will hear more on the impact of the grounding from American and Southwest when they report earnings later this week and when Boeing reports on Jan. 29.
