HG Bonds: Boeing Shops $1.4B, Four-Part Deal Ahead of Two Maturities

Boeing Co. (NYSE: BA) is in market with a $1.4 billion, four-part public offering across five-year notes due 2023, a 10-year issue due 2028, a 20-year tranche due 2038, and 30-year notes due 2048, all with a March 1 maturity date, sources said. The “no-grow” issue is guided to an A/A2/A profile.

Goldman Sachs is a bookrunner across all the tranches. Additionally, Citigroup and J.P. Morgan are marketing the 2023 issue, Barclays and BAML are bookrunners for the 2028 notes, SMBC and Wells Fargo are bookrunners for the 2038 tranche, and Deutsche Bank and Mizuho are marketing the long bonds.

The deal will carry make-whole call provisions and par calls from one and three months prior to maturity for the five- and 10-year notes, and from six months prior to maturity for the 20- and 30-year notes.

According to regulatory filings, the proceeds from the offering will be used for general corporate purposes. Of note, Boeing has two long-term maturities due this year, starting with $350 million of 0.95% notes due on May 15, followed by $250 million of 2.9% notes due Aug. 15, which was issued by subsidiary Boeing Capital Corp., according to S&P Global Market Intelligence.

Initial whispers for today’s proposed offering surfaced at T+55–60 for the 2023 notes, at T+75–80 for the 2028 issue, in the T+85 area for the 2038 notes, and at T+100–105 for the long bonds, indicating reoffer yields near 3.20%, 3.64%, 4%, and 4.15%, based on the tight end of talk.

The Chicago-based company last tapped the market a year ago, when it placed a $900 million, three-part offering, evenly split across 2.125% five-year notes due March 2022 at T+42, or 2.38%; 2.8% 10-year notes due March 2027 at T+60, or 3.07%; and 3.65% 30-year notes due March 2047 at T+85, or 3.91%. For reference, the 2022 issue traded yesterday at T+18 (or at a G-spread equivalent of 30 bps), the 2027 notes changed hands last month at T+49 (at a G-spread of 51 bps), and the 2047 notes traded late last month at T+75 (or at a G-spread of 77 bps), according to MarketAxess.

Since December, Boeing and Brazilian aircraft manufacturer Embraer S.A. have been in discussions about a possible transaction involving a possible merger. According to S&P Global Ratings neither company has specified what form such a deal may take, though it could be a joint venture, a full acquisition of Embraer, or some other deal structure. The government of Brazil maintains a “golden share” in Embraer, which it could use to put pressure on or block the deal.

S&P Global Ratings said Boeing’s ratings will likely not be affected by a possible transaction between the two companies. “We believe that Boeing has flexibility at the current rating to undertake a large multi-billion dollar transaction because the company’s funds from operations (FFO)-to-debt ratio is currently well above our downgrade trigger of 40% (Boeing’s FFO-to-debt ratio was 62% for the 12 months ended Sept. 30, 2017),” the agency, which maintains an A rating and stable outlook, said on Dec. 22, 2017.

“The company currently has about $10 billion in cash and short-term investments and we expect it to generate at least $10 billion of free cash flow over the next 12 months. However, our current forecast assumes that management will use all of the company’s free cash flow and some of its cash on hand for dividends and share repurchases,” analysts added.

Last April, Fitch affirmed its A rating and stable outlook on Boeing. “Large acquisitions, although not anticipated, also could affect the ratings, as could debt-funded share repurchases. Sustained consolidated FFO-adjusted leverage approaching 2.0x could lead to a negative action,” Fitch said at the time. — Gayatri Iyer

Try LCD for Free! News, analysis, data

Follow LCD on Twitter.

LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

Leave a Reply

Comments are moderated and will not appear until the admin has approved them.