New York, January 28, 2021 -- Moody's Investors Service ("Moody's") affirmed the Baa2 senior unsecured
and Prime-2 short term ratings it assigns to The Boeing Company
("Boeing" ). The rating outlook is negative.
"The rating affirmations reflect Moody's view that Boeing's
franchise will remain durable, notwithstanding the extremely bad
year it had in 2020 and the still multi-year mission to reduce
debt," said Moody's Lead Analyst, Jonathan Root.
"The recent return of the 737 MAX to the skies is the first of two
important milestones that will restore the company's cash flows,
a sustained recovery in air travel demand will be the second and more
important one at this stage of the coronavirus pandemic."
said Root. Moody's anticipates 2021 free cash flow of between
negative $5 billion and negative $11 billion. The
smaller loss assumes delivery numbers that represent substantially all
of the current inventory of 737s and 787s, the larger, about
60% of the current finished aircraft inventory of 410 and 80 units
of these models, respectively. The affirmations also reflect
Moody's consideration of the company's strong liquidity,
with $25 billion of cash heading into 2021, $9.5
billion of committed credit lines and expected sturdy access to capital
markets, whether debt or equity, that will absorb 2021's
cash burn with significant cushion.
Sustaining the negative outlook reflects the still uncertain duration
of the impact of the coronavirus on demand for air travel, the recovery
of which is needed to restore airlines' sustained demand for new aircraft.
Boeing's ability to retire debt is closely tied to the vitality
of its Commercial Airplanes operations, which is closely-knit
with the recovery in air travel demand, though likely with an 18
to 24-month lag. The negative outlook positions the company
for a ratings downgrade if Moody's anticipates that free cash flow will
be weaker and for longer than its current expectation of positive free
cash flow in 2022 or if debt/EBITDA will not approach 5x by the end of
2023.
RATINGS RATIONALE
The Baa2 senior unsecured rating reflects Boeing's investment-grade
business profile as one of just two manufacturers of large commercial
aircraft and a prime US defense contractor and its strong liquidity.
This is balanced against a continuing stream of execution mis-steps
across commercial and defense programs and the coronavirus pandemic's
pressure on demand for new aircraft. In the Baa2 rating,
Moody's anticipates that in 2022, Boeing will begin to de-lever
its capital structure with all of its free cash flow, to establish
debt-to-EBITDA near 4.5x by the end of 2023.
Moody's assumes reported debt will need to decline to about $35
billion from the $63 billion on the balance sheet at the end of
2020, to reduce leverage to the mid-4x level and that further
de-levering will occur through 2025.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if Moody's expects that progress
in restoring substantial free cash flow and improving credit metrics will
be delayed beyond 2023. Insufficient growth of annual deliveries
of commercial aircraft will be the likely impediment to generating sufficient
free cash flow. Weakened liquidity, possibly indicated by
cash sustained below $10 billion and/or reliance on the $9.5
billion of revolving credit facilities, could also lead to a downgrade.
There will be little upwards rating pressure before the company's
operating performance improves, and it strengthens its capital structure.
Specifically, ratings could be upgraded if key credit metrics strengthen
such as debt/EBITDA falling below 3.5x and retained cash flow to
net debt approaching 25%. An upgrade would also depend on
Boeing maintaining conservative financial policies -- including
limiting returns to shareholders -- and strong corporate
governance practices.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Aerospace and Defense
Methodology published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1224306.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
COMPANY PROFILE
The Boeing Company, headquartered in Chicago, Illinois,
is a leading large commercial airplane manufacturer and one of the largest
prime contractors for aircraft and related systems to the US Department
of Defense. The company operates in three principal business segments:
Commercial Airplanes; Defense, Space & Security; and
Global Services. Revenue was $58.2 billion in 2020,
down from $76.6 billion in 2019.
The following rating actions were taken:
Affirmations:
..Issuer: Boeing Company (The)
....Senior Unsecured Shelf, Affirmed
(P)Baa2
....Senior Unsecured Commercial Paper,
Affirmed P-2
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2
....Miami-Dade County Industrial Development
Auth, Adjustable Mode Airport Facility Revenue Bonds, 1999A,
Affirmed Baa2/VMIG 2
..Issuer: Boeing Capital Corporation
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa2
Outlook Actions:
..Issuer: Boeing Capital Corporation
....Outlook, Remains Negative
..Issuer: Boeing Company (The)
....Outlook, Remains Negative
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jonathan Root, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
