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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

Moody's downgrades Boeing ratings -- senior unsecured to A3, short-term rating to P-2; outlook stable

18 Dec 2019

New York, December 18, 2019 -- Moody's Investors Service ("Moody's") downgraded its ratings of The Boeing Company, including the company's senior unsecured and short-term debt, to A3 from A2 and to Prime-2 from Prime-1, respectively. Moody's also downgraded the senior unsecured rating for Boeing Capital Corporation, the debt of which Boeing guarantees, to A3 from A2 and downgraded the senior unsecured rating on Boeing's FLT Industrial Revenue Bonds Ser. 1999A to A3/VMIG 2 from A2/VMIG 1. The outlook for both entities was changed to stable from negative.

"The downgrades follow the extension of the grounding of the 737 MAX into 2020, the announced plan to shut down this important program for some interim period, and the uncertainty and elevated risk -- both financial and operational -- for Boeing and its broader supply chain over the ensuing period,," said Moody's lead analyst, Jonathan Root.

Moody's notes the regulatory uncertainty regarding when the 737 MAX will be allowed to return to service across the globe and the potential future regulatory burdens regarding certification of new-design and updated aircraft. The suspension of assembly of 737 MAXes for an unspecified timeframe that Boeing announced on December 16 will increase costs for the program, including ongoing financial support to many suppliers; and increase risk in the production system, currently, and in the ramp-up phase once assembly re-starts. The extended grounding will increase airlines' and lessors' claims for compensation. The program costs that will be accrued and realized pro-rata with future deliveries, and anticipated increases in compensation claims by airlines will lower the 737 program margins and cash generation for years to come. Moreover, Moody's considers that Boeing's reputation can be adversely affected as the grounding extends and from its governance mis-steps with broadening social considerations related therefrom, which could have a more lasting impact on the company's business.

RATINGS RATIONALE

The A3 senior unsecured rating broadly reflects Boeing's position as one of two manufacturers of large commercial airplanes and a prime US defense contractor. The diversification of the defense and services businesses helps mitigate increasing financial and operational risk within the company's commercial aircraft operations.

The stable outlook reflects the company's strong liquidity and financial flexibility which, together with stability in the defense business and ongoing growth in services, mitigates the impact while the MAX remains grounded. The stable outlook also reflects that Boeing's historically aggressive financial policy will remain tempered, with no share repurchases until after a sustained recovery following the ungrounding of the MAX.

There will be no upwards pressure on the ratings until after the MAX program returns to normal, the inventory of aircraft is depleted, and the effects of the grounding on the financial profile have been reversed, including the repayment of commercial paper and other debt used to fund the MAX disruption. Improvements in key credit metrics that could lead to a ratings upgrade include debt-to-EBITDA moving below 2.5x and retained cash flow-to-net debt above 40% while EBIT-to-interest approaches 10x.

A downgrade of the ratings could occur if the grounding runs into the second-half of 2020, particularly if aviation authorities identify some other component of the MAX's flight management system that requires updating. Assuming the MAX is re-certified, other factors that could lead to a downgrade include share repurchases that occur before credit metrics are restored to near pre-grounding levels or repeatedly exceed free cash flow, significant cancellations of MAX orders, or other mis-steps in key aircraft or defense programs that require significant charges. Expectations of sustaining unrestricted cash net of issued commercial paper below $4 billion, retained cash flow to net debt below 25%, EBIT to interest expense below 6x, EBITA to average assets below 8%, and/or debt to EBITDA above 2.5x could also lead to a negative rating action.

The principal methodology used in these ratings was Aerospace and Defense Industry published in March 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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. Boeing reported $87 billion of revenue for the twelve months ended September 2019, including a reduction of about $5 billion for the customer compensation charge it booked in the second quarter, down from $97.5 billion for the same period ending September 2018.

The following rating actions were taken:

Downgrades:

..Issuer: Boeing Capital Corporation

....Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2

..Issuer: Boeing Company (The)

....Senior Unsecured Shelf, Downgraded to (P)A3 from (P)A2

....Senior Unsecured Commercial Paper, Downgraded to P-2 from P-1

....Senior Unsecured Regular Bond/Debenture, Downgraded to A3 from A2

....Miami-Dade County Industrial Development Auth, Adjustable Mode Airport Facility Revenue Bonds, Series1999A, Downgraded to A3, VMIG2, from A2, VMIG1

Outlook Actions:

..Issuer: Boeing Capital Corporation

....Outlook, Changed To Stable From Negative

..Issuer: Boeing Company (The)

....Outlook, Changed To Stable From Negative

REGULATORY DISCLOSURES

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review

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

Russell Solomon
Associate Managing Director
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

No Related Data.
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​
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