Boeing seeking ‘tens of billions’ in U.S. government loan guarantees

Boeing seeking ‘tens of billions’ in U.S. government loan guarantees

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Boeing

Boeing's Chicago headquarters. 

Updated at 4:41 p.m.

Boeing Co., which employs 16,000 people in the St. Louis area, is seeking "tens of billions of dollars" in U.S. government loan guarantees and other assistance as faces it a looming liquidity crunch from the massive coronavirus economic disruption impacting the entire aviation sector, two people briefed on the matter told Reuters.

The U.S. planemaker has told lawmakers it needs significant government support to meet liquidity needs and it cannot raise that in current market conditions, the people said.

Boeing confirmed Monday it was in talks with the administration about short-term support, while U.S. President Donald Trump said Tuesday the U.S. government would provide support. Boeing has noted that typically 70% of its revenue flows to its 17,000 suppliers and has told lawmakers that without significant assistance the entire U.S. aviation manufacturing sector could collapse.

The amount of aid Boeing needs remains in flux based on market conditions and how long the crisis lasts. Congressional officials are reviewing Boeing's cash needs as Congress considers a stimulus and rescue package that could top $1 trillion.

"Boeing got hit hard in many different ways," Trump said at a press conference Tuesday. He said he would also help suppliers like engine maker General Electric Co. "We have to protect Boeing... We'll be helping Boeing."

Boeing's stock has been plummeting. After falling 24% on Monday, it fell another 4.4% Tuesday to close at $123.92. Boeing is down more than 60% over the last month as the coronavirus pandemic slashed travel demand worldwide. Earlier on Monday, S&P Global downgraded Boeing's credit rating and lowered its free cash flow expectations for the company.

Boeing said late Monday that short-term access to public and private liquidity will be one of "the most important ways" for airlines, airports, suppliers and manufacturers to recover.

Boeing has been struggling to win approval from regulators for its 737 MAX to return to service after two fatal crashes in five months. The plane has been grounded since March 2019.

U.S. airlines and cargo carriers have said they are seeking at least $58 billion in loans and grants along with additional tax changes, while airports have sought $10 billion.

Boeing confirmed on Tuesday that it had completed the drawdown of the rest of a $13.8 billion line of credit it had secured last month.

Boeing’s total debt nearly doubled to $27.3 billion in 2019, as it compensated airlines and grappled with additional production costs for the 737 MAX even as the grounding prevented it from delivering the aircraft to buyers.

Reuters on Tuesday reported Airbus has about 16 billion euros ($17.60 billion) in cash and needs some 5.5 billion euros a month, a person familiar with Monday’s discussions said. ($1 = 0.9090 euros)

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Our earlier story, posted at 11:09 a.m.

Boeing Co. shares tumbled as much as 22% to a more-than-six-year low on Tuesday following a rating downgrade that reflected its worsening cash flow due to the extended grounding of its 737 Max jet and the blow from the coronavirus pandemic.

The stock was the biggest drag on the blue-chip Dow Jones Industrial Average index, shaving off 100 points.

Rating agency Standard & Poor’s on Monday lowered its credit rating on the planemaker to ’BBB’ from ’A-’ and now expects 2020 free cash flow in a range of negative $11 billion to $12 billion, down from a prior estimate of positive $2 billion.

Reuters reported last week that Boeing is set to draw down the full amount of a $13.8 billion loan, likely bringing its total debt to $41.1 billion.

Boeing’s total debt nearly doubled to $27.3 billion in 2019, as it grappled with additional costs related to the 737 Max grounding and compensated airlines.

The company confirmed it is in talks with senior White House officials and congressional leaders for short-term assistance and a $50 billion bailout both for itself and the aviation sector.

At Tuesday’s low, Boeing’s shares are down about 74% since the fatal crash of an Ethiopian Airlines plane on March 10 last year.

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