Boeing's Large Bond Deal Solves Liquidity Problem, Says Bullish Goldman Sachs

Boeing Co BA has raised $25 billion in new capital through traditional debt financing, with maturities between three and 40 years and interest rates between 4.5% and 6%.

This eases liquidity concerns and eliminates fears of the company using federal government funding, according to Goldman Sachs. 

The Boeing Analyst

Goldman Sachs’ Noah Poponak maintained a Buy rating on Boeing, with a $209 price target. 

The Boeing Thesis

There are two key takeaways from Boeing’s new bond deal, Poponak said in a Thursday note. (See his track record here.)

The first is around liquidity concerns, with the company reporting a cash burn, albeit small and largely anticipated, when it released its first-quarter results.

Goldman Sachs expected Boeing to exit 2020 with a cash burn of $21 billion. “An additional $25bn cushion is substantial relative to that set of assumptions,” the analyst said. 

The second key takeaway is that the company could have resorted to funding with more onerous terms, which did not occur, Poponak said.

The market had fears of Boeing using federal government funding, which could mean a dilutive equity stake, or turn to private funding outside a bond deal at a higher interest rate and maybe even equity, the analyst said. 

BA Price Action

Boeing shares were down 4.22% at $134.93 at the time of publication Friday. 

Related Links:

Boeing Raises $25B In Debt Offering, Says No Longer Needs Federal Aid

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