Analyst Note| Burkett Huey |
On April 30, Boeing announced that it raised $25 billion in bonds with maturities ranging from three years to 40 years and that it is no longer seeking additional public or private funding. We’re maintaining our $281 per share fair value estimate for the firm and view shares as substantially undervalued. Our view of the transaction is twofold: On one hand, any liquidity concerns that investors had ought to be satiated by this. We’re positive about this transaction as a whole because it takes a large amount of tail risk off the table. By our estimates, the additional debt would allow the firm to survive for about a year of cash flow as bad as this March’s cash flow, which we think is an overly bearish assumption because Boeing is more closely managing expenses now. We think the firm will return to being cash flow positive in the months after the 737 MAX is recertified, which we’re expecting will happen in late summer 2020.