Boeing (BA) - Get Report entered into a $5.28 billion, two-year revolving credit agreement with several banks as it continues to grapple with a prolonged pandemic-driven slowdown in commercial air travel that has slammed demand for new airplanes.
In a regulatory filing with the Securities and Exchange Commission, Boeing said it has entered into the credit agreement with Citigroup, JPMorgan Chase, BofA Securities and Wells Fargo Securities.
Boeing will pay a fee between 0.2% and 0.5% per year on the commitments, depending on its credit rating. The credit agreement is scheduled to end on March 19, 2023. Investment-grade rated companies use revolving credit facilities as backstop financing, with these facilities remaining undrawn for the most part.
“This is another prudent step for us as we proactively manage access to liquidity through the global pandemic, lay the foundation for market recovery and transform our business for the future," Boeing Executive Vice President, Enterprise Operations and CFO Greg Smith said in an emailed statement to TheStreet.
Boeing posted a record annual loss in January as the pandemic and plunge in air travel compounded problems for the world's biggest aerospace company which already was reeling from the global grounding of 737 MAX jets after two fatal crashes.
However, the company earlier this month said its net order book turned positive for the first time in more than a year, with 86 gross orders and 39 new requests for the 737 MAX that put Boeing's total backlog at 4,041 aircraft as of the end of February.
Boeing's total debt stood at $63.58 billion as of last month. Its debt ratio, which investors and analysts scrutinize to understand how much financial leverage a company, is 0.42, based on Boeing having $152.14 billion in total assets.
As a rule of thumb, a debt-ratio of more than 1 indicates that a considerable portion of the debt is funded by assets.
Smith also said in his statement that Boeing has no current plans to draw on its credit revolvers, "as we continue to be confident that we have sufficient liquidity and are not planning to increase our debt levels.”
At last check, shares of Boeing were down 1% at $248.83.