Boeing to issue $900 million senior unsecured note

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By admin October 28, 2015 21:22

Boeing to issue $900 million senior unsecured note

Fitch Ratings has stated that it expects to assign an ‘A’ long-term rating to Boeing’s proposed issuance of approximately $900 million of senior unsecured notes. The notes will be issued in three parts, with maturities of 2020, 2022, and 2025. Proceeds will be used for general corporate purposes.

The Large Commercial Aircraft (LCA) market is in the middle of a strong upturn which will drive higher revenues and cash generation at Boeing Commercial Airplanes (BCA). A large order book, overbooked delivery slots, new airplane model deliveries, delivery acceleration requests, and geographic diversity are elements of this outlook. Since 2010 BCA’s revenues have nearly doubled and unit deliveries increased 56% as the company executed 10 production rate changes. Fitch believes support for higher production rates persists because of the large backlog (5,656 aircraft worth approximately $426 billion at the end of September) and strong orders. Fitch expects BA’s commercial deliveries will be 755 aircraft in 2015 and 765 aircraft in 2016. BCA’s focus over the next two years will be executing the deliveries of the large backlog, lowering 787 costs, and completing the development of several derivative aircraft models.

The 787 program remains a key driver of Boeing’s growth and competitive position, and it has been a sizeable start-up business within the Boeing enterprise, growing to a Fitch-estimated $12 billion to $13 billion of revenues in about four years. Fitch believes the bulk of the risks have been retired, and Boeing has estimated the program will begin contributing positive cash flow later in 2015.

Concerns remain about the program’s profitability and large inventory level, which reached $41.5 billion at the end of September. The inventory included $28.3 billion of deferred production costs accumulated through the use of program accounting. Deferred production per aircraft has been gradually declining. While many risks have been retired, the program is still developing in some areas including the plan to raise production to 12/month from 10/month in late 2016, the launch of the 787-10, and need to stabilize parts of the supply chain.

admin
By admin October 28, 2015 21:22