Moody’s reviews Boeing for downgrade after machinists vote to strike
Boeing’s Baa3 rating is one step above speculative grade, putting borrowing costs and its investor base in focus as Moody’s studies the strike’s cash impact.
By Maya Okafor · Markets Writer
· 2 min read
Moody’s Ratings put all of Boeing Co.’s credit ratings under review for a possible downgrade after the company’s machinist union voted to strike, MarketWatch reported. For everyday investors, the key issue is Boeing’s access to cash: its current Baa3 rating sits at the lowest level still considered investment grade.
A credit rating is a score that agencies assign to a company’s debt, meant to show how risky it may be for lenders and bond investors. Investment grade generally signals lower credit risk. If Moody’s cuts Boeing from Baa3, the company’s debt would move into speculative-grade territory, often called junk debt.
That shift can have practical effects. MarketWatch reported that a downgrade would make it harder for Boeing to borrow and would remove its bonds from a wider group of potential buyers, including pension funds that are restricted to investment-grade debt.
Moody’s said it will review how long the strike lasts and how it affects Boeing’s cash flow. Cash flow refers to the money moving in and out of a business, and it is especially important for a manufacturer like Boeing because aircraft production requires substantial spending before deliveries generate cash.
The ratings agency also said it will examine whether Boeing may need to raise equity to strengthen liquidity. Liquidity is the company’s available cash and other resources it can use to meet near-term obligations. An equity raise generally means bringing in money by selling ownership stakes, though Moody’s did not specify any transaction.
Moody’s also tied the review to Boeing’s production problems. In its statement, the agency said: “We will also assess the extent to which the strike and ongoing challenges in increasing production of the 737 and 787 aircraft models affect the timing of growth in production rates and the pace and scale of improvements in Boeing’s operating cash flow.”
The review adds another pressure point for Boeing shareholders. MarketWatch reported that Boeing’s stock was recently down 3.7% and had declined 40% so far in the year.
For bond investors, Moody’s review is a warning sign rather than an actual downgrade. The rating remains Baa3 while the agency studies the strike, production ramp-up and liquidity picture. The outcome will help determine whether Boeing keeps its investment-grade status or falls below that line.
This story draws on original reporting from MarketWatch.
