Boeing Plans Full Drawdown of $13.825 Billion Loan

Boeing Co. is planning to draw down the full amount of a $13.825 billion loan as early as Friday as the planemaker grapples with worldwide travel disruptions from the coronavirus, people familiar with the matter said.

Boeing obtained the loan from a group of banks last month to help it deal with cash burn while it prepares to return its 737 Max plane to the skies. It initially tapped about $7.5 billion of the debt, and is now expected to draw the rest, said the people asking not to be named discussing private information. Boeing plans to draw the remainder of the loan as a precaution due to market turmoil, one of the people said.

Boeing extended declines on the news, tumbling 7.3% to $214.20 at 10:04 a.m. in New York. That was the biggest drop on the Dow Jones Industrial Average. The cost to protect Boeing’s debt for one year in the credit default swaps market widened 10 basis points to 87 basis points at 10:10 a.m. in New York, according to ICE Data Services.

Representatives for Citigroup Inc., which led the loan, and Boeing declined to comment.

The loan came about before the Covid-19 coronavirus became a global crisis. In addition to its 737 Max woes, the company now faces lost revenue amid falling demand for planes as passengers cancel flights and airlines pull back orders on new jets.

Boeing is starting to be squeezed as financially constrained airlines delay advance payments that are made as their airplanes start to take shape in its factories. Such payments for its grounded 737 Max have largely halted and are in jeopardy for the company’s other main source of cash, the 787 Dreamliner, due to the nosedive in long-range travel.The two-year loan is structured as a delayed-draw term loan, which allows Boeing to wait to use the money until needed. Such loans are typically expected to be accessed fully.

The original loan was $13 billion, but two banks later joined the lender group to bring the total to $13.825 billion. The loan documents allow for additional commitments for a total obligation of up to $14.5 billion.

Companies affected by the virus are now turning to banks for short-term financing to provide a safety net. United Airlines Holdings Inc. raised $2 billion in new liquidity with a secured term loan, Norwegian Cruise Line Holdings Ltd. has signed a new $675 million revolving loan and Royal Caribbean Cruises Ltd. has increased its revolving credit capacity by $550 million to bolster liquidity.

–With assistance from Julie Johnsson and Jeannine Amodeo.