As members of Boeing Co.’s machinists union got ready for a third contract vote on Monday, the company’s stock went up 4% on Friday on hopes that the expensive strike would end. However, the company’s bonds were also looking good.
The aerospace giant’s new deal comes after two previous ones were turned down by the union.
The following chart from BondCliQ Inc., a data solutions provider, shows that the company’s outstanding bonds now have very high yields after growing with Treasury yields over the past month. The yield move is shown by the yellow line.
These notes from the company are earning more than 6%: the 7.0008% note due in May 2026 and the 6.858% note due in May 2054.
More than 5% is being paid on even short-term notes, like the 6.259% notes that mature in May 2027 and the 6.298% notes that mature in May 2029.
The next chart shows that there has been less space between the bonds’ spreads over the last two months.
Investors appeared to be “selling-the-news” Friday, as one market source described the trading pattern.
Boeing has more than $57 billion of debt outstanding with $4.3 billion to come due in 2025, followed by $7.9 billion in 2026.
The machinists at the company have been on strike since September 13. On Thursday, the Associated Press stated that they will vote on an offer that would raise wages 38% over four years, or about 453% over the course of four years.
Boeing BA 3.54% said in a statement Thursday that the company was also giving a $12,000 contract-ratification bonus, which is more than the $7,000 that was offered before. The company also said it would put more money into the 401(k) funds of its employees.
One issue that keeps coming up is benefits. Workers want their traditional pensions to be restored. These pensions were frozen for workers who were already working at the time and were not given to people hired after January 2014. People on picket lines in the Seattle area have talked a lot about pensions, but the Arlington, Va.-based company won’t give in on the problem.
Boeing is having a hard time getting back on track after a string of production mistakes, so the strike has come at a bad time.
After a door panel fell off an Alaska Airlines 737 MAX plane in January, the company was the subject of several government investigations. It is still dealing with the legal fallout from two fatal 737 MAX crashes in 2018 and 2019.
The company said last month that it had lost $6 billion in the third quarter and used up another $2 billion in cash.
The company may have bought itself some time with another problem: the risk of being downgraded to “junk” status while it works to pay off its big debts. All three credit rating agencies put the credit at the very bottom of the investment grade scale.
This week, Boeing sold common stock and depositary shares to the public and raised about $24 billion. The sale itself brought in about $21 billion, and underwriters added another $3 billion when they took their overallotment option.
The money will be used for general business reasons, such as paying off debt, providing working capital, making capital purchases, and giving money to subsidiaries. Bondholders like the plan to pay off debt, and the money raised may calm the rating agency’s nerves.
The stock has lost about 41% so far this year, while the S&P 500 has gained 21%.
