Boeing to withdraw billions of cash in loans as pressure mounts

(Reuters) – Boeing Co TO FORBID plans to withdraw the remainder of a $ 13.8 billion loan it agreed to last month, a source told Reuters on Wednesday, as the coronavirus outbreak increases pressure on the U.S. aircraft manufacturer due immobilization of its 737 MAX.

FILE PHOTO: The Boeing Company logo is displayed on a display on the floors of the New York Stock Exchange (NYSE) in New York, United States, March 11, 2019. REUTERS / Brendan McDermid – RC1901E5ACE0 / File Photo

The source said the company is taking the plunge due to the overall market volatility and not because of the change in the return-to-service date of its 737 MAX aircraft, which has been regularly pushed back and is now expected no earlier than middle of the year.

Boeing shares fell 11% to $ 205.56 following the loan withdrawal announcement, initially reported by Bloomberg News, largely in line with a general slump in airline and other aerospace stocks.

The aircraft manufacturer could withdraw the money as early as Friday, the source said.

Boeing did not immediately comment.

U.S. companies rushed to borrow more money and increase their holdings this week, as market turmoil fueled by falling oil prices and the coronavirus outbreak raised the prospect of an economic slowdown.

Airlines have been among the hardest hit, as a collapse in bookings and business travel forced sweeping reductions in flight times, capacity and forecasted annual results.

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

Media reported last month that the aircraft manufacturer raised a total of $ 13.825 billion in a fundraiser from lenders such as Bank of China and PNC. Analysts estimated last year that the company was losing about $ 1 billion per month as a result of the MAX grounding.

Boeing, which has seen its orders collapse in the face of the MAX crisis, said separately on Wednesday that it won 18 new orders for wide-body aircraft in February, although MAX’s cancellations saw it lose 28 orders last month.

The aircraft maker has encouraged customers to swap the MAX for more expensive 787 or 777 jets, but analysts say airline capacity cuts could weaken such demand.

Boeing, which has said it expects the 737 MAX to be recertified by the middle of this year, also faces the possibility of further delays after failing to gain support from US aviation regulators earlier. this week to leave the wiring harnesses in place on the aircraft on the ground.

Reporting by David Shepardson in Washington, Rachit Vats in Bengaluru; additional reporting by Ankit Ajmera and Eric Johnson; edited by Patrick Graham

Bernadine J. Perkins