The company plans to sell 90 million common shares along with approximately $5 billion in depositary shares, as stated in a release on Monday, which corroborated an earlier report by Bloomberg News.
The common shares alone are expected to generate nearly $14 billion, based on the closing price of $155.01 on Friday. This would represent the largest share sale in the U.S. since SoftBank Group Corp. divested part of its stake in T-Mobile US Inc. in 2020, according to data from Bloomberg.
As of 1:05 p.m. in New York, Boeing's shares had decreased by 1.4%. The stock has experienced a decline of about 40% this year, making it the second worst performer in the Dow Jones Industrial Average.
With overallotments, the total amount raised could reach approximately $21.8 billion, based on Bloomberg's estimates.
This capital influx is critical for new Chief Executive Officer Kelly Ortberg, who is facing a balance sheet burdened by years of difficulties and the repercussions of a strike that has now entered its seventh week, severely impacting the production of the 737 Max jetliner, which is vital to the company's revenue. Boeing requires this funding to sustain its investment-grade rating and to support its production increase once the strike concludes.
The company is projected to utilize around $4 billion in cash during the fourth quarter, leading to an estimated free-cash outflow of about $14 billion for the year. Boeing anticipates continued cash burn through the first half of next year as it resumes operations at its airplane factories, including the assembly lines for the 737 Max.
Last week, Boeing factory workers voted against the company's latest contract proposal, which offered a 35% wage increase over four years. In a memo to employees dated October 11, Ortberg indicated that the company intends to reduce its workforce by approximately 10%.
On October 23, the company obtained approval from the US Securities and Exchange Commission to issue up to $25 billion in equity and debt. Additionally, Boeing has secured a new credit agreement worth $10 billion, which provides “extra short-term liquidity as we navigate a challenging environment.”
Ortberg is exploring strategies to optimize Boeing’s extensive portfolio. He has initiated a review of the company’s operations, which the CEO anticipates will be completed by the end of the year. This review includes evaluating the future of the struggling Starliner space capsule program, as reported by Bloomberg News.
As part of the offering, the depositary shares will represent a 1/20th interest in newly issued mandatory convertible preferred stock, set to convert in October 2027 or earlier, based on a predetermined formula, as stated in the announcement.
The three-year convertible securities are being offered with a dividend yield of 6% to 6.5% and a conversion premium ranging from 17.5% to 22.5%, according to terms reviewed by Bloomberg News. The pricing for the deal is anticipated to occur on Monday after market close, as indicated by the terms.
The underwriters have the option to acquire an additional 13.5 million common shares and $750 million in depositary shares to address overallotments, as detailed in the statement.
PJT Partners is serving as Boeing’s financial advisor for these offerings, according to the announcement.
Goldman Sachs, BofA Securities, Citigroup, and J.P. Morgan are acting as the lead joint bookrunning managers, while Wells Fargo Securities, BNP Paribas, Deutsche Bank Securities, Mizuho, Morgan Stanley, RBC Capital Markets, and SMBC Nikko are participating as joint bookrunning managers.