Boeing pulls out of $4.2 Billion Deal with Embraer

by Demi_em

Looks like this decision was recently announced.

SAO PAULO/PARIS (Reuters) – Boeing Co (BA.N) on Saturday said it had canceled a $4.2 billion deal to buy the commercial jets division of Embraer (EMBR3.SA), unraveling years of work on what the Brazilian planemaker expected to be a transformative move.

Does this reflect a strategic effort that will give shareholders optimism about Boeing’s financial security, or does it suggest a “bad news to come” scenario?

$BA shares hit a low of $128.39 yesterday, after they announced production cuts and pushback of timeline to bring back the MAX fixes.

Edit: I wonder how much of this is to free up money to pay debt that is going to be due in 2020?

Boeing short-term debt and interest payments

The next portion is Boeing’s borrowings, and that is obviously what brought the company in problems with another crisis hitting many industries; Boeing borrowed $25.4B in 2019 and fully used its $13.8B credit facility. From the $25.4B, $12.2B was used to make debt repayment. Boeing’s current portion of long-term debt and short-term debt is $7.3B. While many companies are now tapping into their credit lines, Boeing already did that last year, which, by no means, is a positive indication. I also modeled in Boeing tapping its $9.6B revolving credit facility, of which $3.2B is due by the end of October 2020, though Boeing does have the ability to extend the termination times by a year.

I estimated that Boeing would pay around $800-950 million in interest on their debt at the end of 2019 and a hefty $1B fee on their $13.8B delayed drawdown arrangement as well as a significant fee on the credit line agreements.


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