Boeing raised $25 billion in a bond offering. It is going to help the company to avoid taking the government aid to combat the coronavirus led lockdown.
Reuters reported Boeing’s capital raise is the sixth-largest investment-grade bond offering of all time the biggest year to date, According to Refinitiv data. The Federal Reserve’s intervention in the credit market has given growth to the companies with Debt problems.
The US Central Bank has cut down interest rates to zero. It also rolled out $2 trillion for the purpose of helping companies. This is buoyed credit market in the United States.
The businesses are suffering a lot due to the coronavirus outbreak and the lockdowns. Amid all this crisis, the airline sector is one of the worst-hit sectors all around the world. During this time, Boeing has been trying to bring its 737 MAX jet into operations after two disastrous crashes.
This week, the company was also to raise between $10 billion and $15 billion in the bond offering. It soon investments incremented the amount of the deal to $25 billion. This step was taken due to massive investor demand.
The demands fluctuations were due to high yields relative to other bond issues, Boeing’s earnings and provisions that we were in favour of the investors. The offering ensured protection of investors in case of a credit rating downgrade. The coupon paid to the holders should raise in case Boeing loses its investment-grade status.
After the huge bond offering the company says it has no further interest to raise funds. Moody’s rating services estimated that the need for funds could be around $30 billion in the current year.
Half of this was achieved by drawing down on a $13.8 billion credit line in the third month of 2020. It also sold seven new bonds. The bonds were due to mature between 2023-2060.
According to Refinitiv data, there is a 10-year bond carrying 5.15% interest and a 450 basis point premium to US Treasuries in the debt sold. The higher yields on offer attracted $75 billion valuations of demand for new bonds.