Boeing Plans $15 Billion Capital Raise This Week to Address Liquidity Crisis

Boeing crisis: The troubled aviation company is all set to raise a massive capital early this week. This is largely aimed at tackling the liquidity crisis which the company is currently witnessing.

While Boeing is planning to raise over $15 billion in the fundraise, the final amount might see a surge depending on the demand, as per sources cited by a Bloomberg report.

The transaction is expected to include both stock and convertible debt. Last week, on October 23, Boeing received approval from the US Securities and Exchange Commission or SEC to sell up to $25 billion of equity and debt. This was primarily aimed at helping the company avoid a downgrade of its credit rating to junk status.

But talks are still ongoing around the final details and timings of the fundraise, the report stated.

Also read: Boeing Production Halt: Indian Airlines May Feel the Heat as Strike Delays Airplane Delivery

Is Boeing’s Capital Boost Enough?

Boeing has been stuck in a long-running crisis. From technical issues, security faults to internal turbulence leading to layoffs, the aviation company continues to remain in murky waters. While the massive capital boost can help the company in tackling the issues, the 'when' factor remains uncertain.

It is worth noting that a $15 billion share sale by Boeing would mark the largest equity offering in the corporate world, according to Bloomberg data.

The company desperately needs the cash injection to uphold its investment-grade credit rating and support its path to recovery. In the fourth quarter, the company is projected to burn roughly $4 billion in cash, pushing its free-cash outflow close to $14 billion for the year.

Free-cash flow generally refers to the amount of cash a company can generate after covering its operating expenses and capital investments.

Cash burn continues...

The company's financial picture might continue to dampen this year. As per a report by Reuters, Boeing is likely to keep burning cash through the first half of next year as it ramps up its airplane factories again. The ongoing strike is further dampening the overall outlook. During the third quarter, the aviation company incurred a massive loss of over $6 billion.

Just last week, the factory workers voted against the company’s latest contract proposal, which offered a 35 per cent wage increase over four years. Meanwhile, Boeing has already announced massive job-cuts. Earlier this month, CEO Kelly Ortberg informed its employees in a memo that the company is planning to reduce its workforce by nearly 10 per cent.