Dépêches

Fitch Expects to Rate Boeing's New Unsecured Notes 'A+'; Negative Outlook

Dépèche transmise le 23 juillet 2009 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to assign 'A+' ratings to The Boeing Company's (BA) planned issuance of new senior unsecured notes (five, 10, and 30 year maturities). Proceeds from the new notes will be used to increase liquidity and for general corporate purposes.

Fitch revised BA's Rating Outlook to Negative from Stable in April 2009. The Outlook revision reflected Fitch's increased level of concern regarding several issues, including the global recession's impact on the commercial aerospace industry, increasing pressure on Department of Defense (DoD) budgets, the health of the aircraft finance market, and BA's buildup of inventories in 2008, which significantly reduced the company's liquidity position. The risk of further delays in the 787 program also drove the Outlook revision, and since April that risk has increased.

Given increased concern about the 787 program, coupled with higher debt levels, Fitch considers BA's ratings to be at the lower end of the 'A+' rating category. The 787's impact on BA's cash flow is Fitch's key credit concern related to the program, particularly the timing of deliveries, which will affect advance payments and inventories. If the most recent 787 schedule change results in a delivery delay of greater than three months compared to the previous schedule, which looks increasingly likely, Fitch could review the ratings for a potential downgrade. Factors that would influence the rating decision would include performance in the rest of BA's businesses (some of which are currently performing better than Fitch's expectations), the magnitude of the 787 delivery delay, costs to fix the structural deficiency in the 787's wing-body join, and the cash flow impact of the delay.

Additional rating concerns include the susceptibility of the commercial aerospace industry to shocks such as terrorism and disease; portfolio concentration at Boeing Capital Corporation (BCC); margin levels that are low for the rating category; periodic labor disruptions; and the performance of some programs at both Boeing Commercial Airplanes (BCA) and Integrated Defense Systems. The pension deficit and several litigation actions are also potential concerns.

BA's debt ratings are supported by the company's balanced business portfolio (approximately 50% defense and 50% commercial), financial flexibility, competitive positions in both of its main business lines, large backlog, high levels of defense spending, and solid credit metrics. BA's liquidity position and favorable debt maturity schedule also support the ratings. Fitch believes that BA has evolved into a more diverse and lower-risk company than it was at the beginning of the last aerospace downcycle that began in late 2001.

As of June 30, 2009, BA's consolidated liquidity position was approximately $8 billion, consisting of $5 billion in cash and investments, and complete availability under $3 billion of bank facilities. As of March 31, 2009, BA's liquidity position, excluding BCC, was approximately $6 billion, consisting of $4.5 billion in cash and investments, and complete availability under $1.5 billion of bank facilities. BCC also had $192 million of cash and $1.5 billion of bank facility availability as of the end of the first quarter. Liquidity at BA will be enhanced with the proceeds of the pending debt issuance, but the higher debt levels will weaken some of BA's credit metrics. Non-operating uses of cash in the third quarter will include the purchase of some of Vought Aircraft Industries' 787 facilities for $580 million and the payment of approximately $450 million for credit guarantees BA provided to Sea Launch Company, which filed for bankruptcy in June.

BA's liquidity position fell by $8.5 billion during 2008 because of significant inventory build-up attributable to the delays in the 787 and 747-8 programs and the machinists strike. Some of the inventory build will reverse in 2009, but the bulk of the inventories will not generate cash until 787 deliveries begin. BA's underfunded pension ($8.4 billion deficit at the end of 2008) could affect liquidity in the medium-term, but required contributions are manageable in 2009 and 2010. BA has significant financial flexibility in its ability to stop share repurchases, which totaled $7.4 billion in 2006-2008, but which should be minimal in 2009. BA has a favorable debt maturity schedule, with less than $150 million coming due in the next 2.5 years, while BCC has approximately $1.75 billion maturing in the same period.

For the last twelve month (LTM) period ending March 31, 2009, BA's leverage (total gross debt to EBITDA), excluding BCC, was 0.9 times (x), compared with 0.6x at the end of 2008 and 0.5x at the end of 2007. Fitch projects that BA's leverage in 2009 will be in the range of 0.9x to 1.2x, including the impact of the proposed debt offerings, and leverage could deteriorate in 2010 depending on commercial airplane build rates and 787 developments. The preceding calculations exclude BCC by accounting for the subsidiary using the equity method, and non-recourse debt at BA is also excluded.

For additional information, see Fitch's credit update for The Boeing Company dated May 19, 2009 and available on the Fitch Ratings web site at 'www.fitchratings.com'.

Fitch currently rates BA and BCC as follows:

--Issuer Default Rating (IDR) 'A+';

--Senior unsecured debt 'A+';

--Bank facilities 'A+';

--Short-term IDR 'F1';

--Commercial paper programs 'F1'.

The Rating Outlook is Negative. The ratings cover approximately $9.1 billion of debt ($5.7 billion at BA, including approximately $380 million of non-recourse debt, and $3.4 billion at BCC). BCC's ratings are linked to BA's ratings due to the existence of a support agreement and other factors such as an operating agreement and transactional support provided to BCC by BA.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.