After initial reports of Boeing looking into borrowing $10 billion from banks to navigate through tough waters, CNBC reports that the company secured a loan of $12 billion to finance its way through the oncoming storm.
Citing people familiar with the matter, the publication indicates that the loan is from several U.S. based banks. It is a two-year delayed-draw loan, meaning that Boeing would be able to use the money on a later date, rather than immediately.
The company is set to have a very expensive and a lackluster year in terms of cash flow: as the Boeing 737 MAX groundings continue, the manufacturer has stopped the production of its cash-cow narrow-body. In addition, several airlines have reached compensatory deals with the planemaker to recuperate lost revenue due to the fact that the MAX has stayed grounded since March 2019. The aircraft was banned from flying by authorities around the world a few days after the Ethiopian Airlines Flight ET302 crash, which was the second fatal accident of the type in less than six months.
Boeing has already taken an initial $4.9 billion after-tax charge “in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding” just before the company announced its Q2 2019 results.
Carriers, including American Airlines (A1G) (AAL) and Southwest Airlines (LUV) , indicated that the deals reached with the manufacturer would reduce the cost of new aircraft deliveries and the cost of maintaining the existing 737 MAX fleet. For Boeing, that means that the cash flow will be reduced even after the troubled jet is ungrounded, as Original Equipment Manufacturers (OEM) receive the majority of the sum for aircraft upon delivery.
Furthermore, Boeing is looking to finalize the tie-up with Embraer to establish Boeing Brasil–Commercial in a deal worth $4.2 billion. The tie-up is still pending regulatory approval.
The Chicago-based company is set to announce its Q4 2019 results on January 29, 2020.