Boeing CFO says aerospace industry needs credit urgently, markets closed to new debt

Boeing CFO says aerospace industry needs credit urgently, markets closed to new debt

FILE PHOTO: A Boeing 787 puts on a display at the Farnborough Airshow, in Farnborough
FILE PHOTO: A Boeing 787-8 puts on a display at the Farnborough Airshow, in Farnborough, Britain July 16, 2018. REUTERS/Peter Nicholls/File Photo

SEATTLE: Boeing's chief financial officer said on Tuesday (Mar 24) the US aerospace industry urgently needs credit to cope with the coronavirus pandemic but "markets essentially are closed" to new debt.

Greg Smith also stressed the strategic value of a US$4.2 billion deal to acquire the commercial planemaking arm of Embraer, driving up shares in the Brazilian group.

The comments on credit in an interview with Reuters appeared to underscore the US planemaker's opposition to granting equity as part of an industry-wide government bailout deal.

US lawmakers have said they could demand stock or equity-based instruments like warrants or options as a condition of government loans.

"Having access to the credit markets is really important for us right now," Boeing CFO Greg Smith said when asked whether Boeing could issue such instruments in return for support.

Chief Executive Dave Calhoun told Fox Business earlier on Tuesday that Boeing could "take a different course" if lawmakers "attach too many things" to a stimulus package.

READ: Boeing plans 737 MAX production restart by May - sources

Boeing has sought US$60 billion in US government loans or loan guarantees for itself and the aerospace industry.

Congress was expected reach agreement on a stimulus and rescue package worth up to US$2 trillion to respond to economic damage from the coronavirus pandemic as soon as Tuesday.

Smith said Boeing, which drew down a US$13.8 credit line it took in February but has a further US$9.6 billion in reserve, was not in discussions to add new commercial debt facilities.

"Not right now. The markets essentially are closed," Smith said. "I mean, there's really not much opportunity to raise any additional debt. That's one of the challenges."

READ: Airlines beg for rescue as coronavirus hit soars to US$250b

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Rating agency Fitch Ratings meanwhile downgraded Boeing to BBB from A-, citing the rapid escalation of the pandemic and its effect on Boeing's aviation markets and operations.

Despite such immediate pressures, Smith said Boeing was beginning to see signs of a recovery in China, echoing comments by Airbus Chief Executive Guillaume Faury on Monday.

Smith also said a tie-up with Brazil planemaker Embraer remained strategically important to the company.

“As you know it’s in the middle of regulatory approval and so we are continuing to monitor that and working closely with the Embraer team," Smith said.

"Strategically, it’s still a great partnership and we have to get through the regulatory hurdles and we’ll see how long that takes. But it still remains a priority for us.”

Shares in Embraer soared as much as 37 per cent on his comments. In later trading they were up 24 per cent.

Smith's comments were the first by a senior Boeing executive since market turmoil raised uncertainty over the deal last week, because of an apparent mismatch between Embraer's market value and the price that Boeing is due to pay for control of its commercial aircraft unit.

The tie-up has also been held up by delays in winning European Union approval.

Source: Reuters/jt