Boeing bonds rally after asset sale agreement
Credit spreads for Boeing tightened on Tuesday after the US jetmaker said it had agreed to sell its digital aviation assets, including navigation data and software business Jeppesen, to Thoma Bravo for US$10.55bn in cash, with proceeds expected to be used to repay debt.
Announced a day before its first-quarter earnings, the planned asset sale was widely expected by the industry after Boeing signaled in previous earnings calls that it would look at streamlining the company.
"This transaction is an important component of our strategy to focus on core businesses, supplement the balance sheet and prioritize the investment grade credit rating," CEO Kelly Ortberg said in a press release today.
After the news, Boeing's 6.528% 2034 senior notes, issued in April last year, changed hands earlier this morning at a spread of 138bp over Treasuries, coming in from 148bp late yesterday, according to MarketAxess.
A sale of its digital aviation business – expected to close by the end of 2025 – would continue the company's efforts to bring down leverage while it looks to revive profitability. Another positive for bondholders is the deal's unexpectedly large size, adding to the potential debt reduction that could be achieved with the asset sale.
"Proceeds are bigger than anticipated," said CreditSights analyst Matt Woodruff in emailed comments. "The market had been expecting something in the $6-$7bn range for Jeppesen alone."
The cash proceeds will also help Boeing manage the additional headwind of the Trump administration's planned tariff increases, said Woodruff. Executives from airlines such as Ryanair have suggested they could delay deliveries until they have further clarity on the direction of import levies.
Boeing reported around US$54bn of debt at the end of the year, according to an investor presentation. Last year, the company sold US$24.25bn of equity and equity-linked instruments to give itself further headroom.
All three major rating agencies have graded Boeing one rung above junk at Baa3/BBB–/BBB–.
With additional reporting by Paul Kilby