Boeing signs $ 5.28 billion loan deal with banks

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Boeing Co (NYSE: BA) has entered into a new two-year revolving credit facility agreement for $ 5.28 billion with a group of banks, according to a regulatory brief released on Monday.

What happened: The American aircraft manufacturer said its latest credit agreement was with Citibank (NYSE: C), JPMorgan Chase & Co (NYSE: JPM), Bank of America Corp (NYSE: BAC) BofA Securities Inc and Wells Fargo & Co. (NYSE: WFC) Wells Fargo Securities LLC as Principal Arrangers and Book Managers and is expected to expire in March 2023.

The aircraft manufacturer will pay a commission of between 0.2% and 0.5% per year on the commitments, depending on its credit rating, depending on the agreement.

Revolving credit is a type of loan issued by a financial institution that offers the borrower the option of withdrawing or withdrawing, repaying and withdrawing again. It is essentially a line of credit, with a variable (fluctuating) interest rate.

Over the past two years, Boeing has turned to banks for financing after its best-selling jet, the MAX 737, came to a global standstill following two back-to-back crashes in which 346 people died. The COVID-19 pandemic further exacerbated the pain of the aircraft manufacturer, as global travel demand was directly affected, leading to a significant drop in aircraft demand and airlines delayed aircraft deliveries.

See also: How to buy Boeing (BA) shares

Why is this important: The aircraft manufacturer relies heavily on aircraft deliveries to generate cash, as it only recognizes revenue after delivering the planes to its customers. In 2020, Chicago-based Boeing delivered around 60% fewer planes, its lowest level in 43 years to airlines and freight companies, compared to last year. He has already spent $ 20 billion in cash due to the groundings.

Boeing’s total debt stands at $ 63.58 billion, from February 2021 whose long-term debt is $ 61.89 billion and the rest is current. Adjusted for $ 7.75 billion in cash equivalents, the company has net debt of $ 55.83 billion.

Short-term debt is the portion of a company’s debt that is owed less than a year, while long-term debt is the portion over one year. Investors look at the debt ratio to understand a company’s financial leverage. Boeing has $ 152.14 billion in total assets, making the debt ratio of 0.42. Typically, a debt ratio greater than one indicates that a considerable amount of debt is financed by assets.

Price action: Boeing shares closed down 1.8% at $ 251.23 and rose 0.4% outside of trading hours on Monday.

Update: After this story was published, Boeing noted in a statement to Benzinga that it had no immediate plans to operate the credit revolvers.

“We do not currently intend to use our credit revolvers, as we continue to be convinced that we have sufficient liquidity and do not plan to increase our debt levels,” said the director. financier Greg Smith.

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