Boeing has opened up two credit facilities from two different lenders for a total of $3.8 billion.
In a United States (US) Securities and Exchange Commission (SEC) filing, the plane maker revealed that it entered into two separate agreements with Citibank and JPMorgan.
One, a 364-day and $800 million revolving credit agreement involves Citibank and JPMorgan as the joint lead arrangers and joint book managers, with the two banks being the administrative agent and syndication agent, respectively. “This facility replaces Boeing’s previous $5.8 billion, 364-day revolving credit agreement, which was scheduled to terminate on August 24, 2023,” the SEC filing read.
Under the agreement, the manufacturer will pay a fee of between 0.125% and 0.3% annually, which will depend on Boeing’s credit rating. Meanwhile, borrowings based on the Secured Overnight Financing Rate (SOFR) will “will generally bear interest at an annual rate equal to Adjusted Term SOFR (as defined in the agreement) plus between 1.250% and 1.7% per annum, depending on Boeing’s credit rating”.
While the $800 million agreement is set to expire on August 22, 2024, Boeing has the right to extend the term for an additional 364 days.
The other $3 billion revolving credit agreement follows a similar structure. Both Citibank and JPMorgan are the main enders, yet the annual commitment fees are between 0.175% and 0.35%, depending on Boeing’s credit rating.
Unlike the previous revolving credit agreement, it has a five-year maturity date, terminating on August 24, 2028. Similarly, Boeing has the “right to extend the term on any anniversary of the closing for one additional year”.
“Boeing’s three-year revolving credit agreement, dated as of August 25, 2022, which consists of $3.0 billion of total commitments and Boeing’s five-year revolving credit agreement, dated as of October 30, 2019, as amended, which consists of $3.2 billion of total commitments, each remain in effect,” the company noted in the SEC filing.
As of Q2 2023, Boeing had a consolidated debt of $52.3 billion (Q1 2023: $55.4 billion), with the S&P, Moody’s, and Fitch giving the company a credit rating of BBB-, Baa2, and BBB-, respectively.
“Overall, we feel good about our operational and financial outlook including the free cash flow and delivery ranges that we set for 2023, as well as for that 2025 and 2026 timeframe,” said David Calhoun, the President and Chief Executive Officer (CEO), during Boeing’s Q2 2023 earnings call.
However, a new manufacturing issue with Boeing 737 MAX and the P-8 Poseidon, could negatively affect Boeing’s delivery numbers in 2023, which would impact commercial aircraft revenues and overall cash flow of the company.
Out of the total $19.8 billion revenue Boeing earned in Q2 2023, $8.8 billion was from Boeing Commercial Airplanes, as the division delivered 136 aircraft during the three-month period, 103 of which were of the 737 MAX/P-8 Poseidon programs.