With credit rating agencies looking at the status of 
Boeing
and its debt, the company could become the biggest ‘fallen angel’ if the aircraft manufacturer’s status is downgraded to junk.
Boeing’s $52 billion index-eligible debt in question
According to Bloomberg, Boeing’s $52 billion index-eligible debt would overshadow Ford’s $51.7 billion debt when the car maker’s credit rating was cut to junk by S&P Global in March 2020. The company returned to investment-grade status in October 2023.
That would make Boeing the United States’ largest ‘fallen angel,’ a term indicating investment-grade rated companies being downgraded to junk status.
According to Goldman Sachs, the number of companies becoming ‘fallen angels’ has dropped to its lowest level in about 25 years.
Photo: VDB Photos | Shutterstock
Nevertheless, the aircraft manufacturer’s credit rating being downgraded to junk status would spell trouble for Boeing since its interest rate costs could rise, with Bloomberg estimating the impact to be at around $100 million per year.
Since the beginning of the International Association of Machinists and Aerospace Workers (IAM) District Lodge 751 and District W24 strike on September 13, all three rating agencies, Fitch Ratings, Moody’s, and S&P Global, have issued updates on Boeing’s credit status.
Related
Boeing filed a complaint with the National Labor Relations Board (NLRB) against the two IAM lodges.
Potentially becoming junk
On September 13, Fitch Ratings stated that there was limited headroom for a strike for Boeing’s investment-grade rating, adding that an extended strike could have a meaningful impact and potentially increase the risk of a downgrade.
Boeing’s current Fitch Ratings rating was BBB-, which the company has held since October 29, 2020.
On the same day, Moody’s said that it has placed all of Boeing’s ratings on review for a downgrade. The rating agency cited the strike, adding that it would assess the strike’s duration and impact on the company’s finances.
“A prolonged strike would fracture the recovery of the Commercial Airplanes business, which remains in its early stages. We believe production of the 737 MAX narrowbody increased to near 30 per month for July and August.”
Photo: Randall Erickson | Shutterstock
On October 8, S&P Global announced that Boeing’s credit rating was placed on CreditWatch with negative implications. The company added that according to its estimates, Boeing will lose around $10 billion of cash in 2024, which will require additional funding to maintain the target cash balance.
Boeing’s Q2 report, published on July 31, indicated that the company had an operating cash outflow of $7.2 billion during the first six months of the year. The free cash flow was -$8.2 billion.
Its consolidated debt at the end of Q2 was $57.9 billion, with the company reporting a shareholders’ deficit of $17.9 billion.
The aircraft manufacturer, which began the year with cash and cash equivalents of $12.6 billion, will report its Q3 results on October 23.
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Improving deliveries
During Q3, Boeing had delivered 116 aircraft, including 92 737 MAX
, totaling 291 aircraft year-to-date (YTD) as of September 30. In Q3 2023, the company had managed to hand over 105 aircraft, including 70 737 MAX, totaling 371 aircraft during the first nine months of the year.
However, while analysts and Brian West, the chief financial officer (CFO) and executive vice president of finance of Boeing, said that before the strike, the company was moving toward producing 38 737 MAXs per month, the labor action that has now continued for almost a month stopped that process immediately.
Photo: VDB Photos | Shutterstock
At the same time, while the strike will definitely impact its suppliers, including Spirit AeroSystems considering furloughs, S&P Global said on October 5 that most of Boeing’s suppliers had a rating cushion to absorb the impacts of a prolonged strike.
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The plane maker delivered more than 30 planes in September.
