March 11, 2020 / 6:23 PM / 19 days ago

Boeing to draw down full US$13.8bn loan

NEW YORK, March 11 (LPC) - Boeing Co plans to borrow the remaining balance of its most recent loan as the airplane manufacturer buys time to return to profitability, sources told Refinitiv LPC.

The original loan was for US$13.825bn. Boeing has eighteen months to fund the delayed-draw.

“They were planning to draw down the full amount over time,” said a source close to the financing.

The loans that were signed in February were expected to provide the company access to short-term liquidity, as the carrier’s financial pressures mounted following a production halt on its 737 MAX aircraft.

Boeing planned to borrow the financing, which is set up as a delayed-draw term loan, in full since it negotiated the deal in December.

The company already borrowed US$7.5bn of the new loan in February. The remaining portion could be borrowed as early as Friday, sources said.

“They were expected to fund the facility,” a second source said. “Otherwise, they would have done a revolving credit.”

Delayed-draw loans differ from revolving credits in that they cannot be re-borrowed. Unlike revolvers, which, like credit cards, offer a revolving line of credit, delayed-draw term loans fund over time.

Boeing informed its suppliers on January 21 that the estimated “ungrounding of the 737 MAX will begin during mid-2020.”

In January, the company went to its banks to raise at least US$10bn of loans as it sought to shore up its balance sheet ahead of earnings in an attempt to reassure investors it had sufficient access to short-term liquidity. The loans were subsequently increased to US$13.825bn.

The move came as financial pressures mounted for the manufacturer following a production halt on its 737 MAX aircraft.

The delayed-draw term loan matures in two years, Refinitiv LPC previously reported. Boeing will be expected to repay it then.

Citi led the new transaction, which opens at 100bp over Libor. JP Morgan, Wells Fargo and Bank of America also signed on as leads.

Boeing and Citi declined to comment.

Additional reporting from Daniela Guzman. (Reporting by Michelle Sierra Editing by Aaron Weinman and Kristen Haunss)

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