Business Context and Reporting Period
Company: The Boeing Company
Filing Type: Form 8-K (Current Report)
Date of Report: November 10, 2011
Event: Entry into material definitive agreements regarding revolving credit facilities.
Key Financial Metrics and Debt Structure
This filing details the establishment of two new revolving credit facilities totaling $4.6 billion in committed capacity, replacing prior agreements.
| Facility Type | Amount | Term | Commitment Fee | Interest Rate Basis |
|---|---|---|---|---|
| 364-Day Credit Agreement | $2.3 billion | 364 days (terminating Nov 8, 2012) | 0.05% per annum | Base rate, Fed Funds + 0.50%, or LIBOR + 1.00% (non-Eurodollar); LIBOR + 0.825% (Eurodollar) |
| 5-Year Credit Agreement | $2.3 billion | 5 years (terminating Nov 10, 2016) | 0.06% to 0.15% per annum (rating dependent) | Base rate, Fed Funds + 0.50%, or LIBOR + 1.00% (non-Eurodollar); LIBOR + 0.565% to 0.975% (Eurodollar, rating dependent) |
Liquidity and Debt Covenants: The agreements restrict consolidated debt to no more than 60% of total capital. They also restrict the incurrence of liens and mergers.
Material Changes Versus Prior Period
- 364-Day Facility: Replaced a $2.376 billion facility dated November 12, 2010. The new facility reduces the total commitment by $76 million.
- 5-Year Facility: Replaced a $2.0 billion facility dated November 16, 2007. The new facility increases the total commitment by $300 million.
- Interest Rates: The new agreements establish specific spreads over LIBOR and base rates, with the 5-year facility offering variable spreads based on Boeing's credit rating.
Outlook, Risks, and Contingencies
Extension and Conversion Options:
- The 364-Day Agreement allows for a 364-day extension or conversion of outstanding borrowings into term loans with a one-year maturity following the termination date.
- The 5-Year Agreement allows for a one-year extension.
Events of Default: Lenders may accelerate repayment if Boeing fails to pay principal/interest within five days, makes materially incorrect representations, fails to perform covenants (30-day cure period), incurs cross-defaults, faces certain ERISA liabilities, or experiences bankruptcy/insolvency.
Related Party Transactions: Some lenders and their affiliates provide financial services (cash management, investment banking, leasing) and have entered into foreign exchange and derivative arrangements with Boeing.
Investor Verification Checklist
- Verify the current utilization rate of the new $4.6 billion combined credit facilities.
- Confirm Boeing's current credit rating to determine the exact commitment fee and Eurodollar interest spread applicable to the 5-Year Credit Agreement.
- Review the consolidated debt-to-total capital ratio to ensure compliance with the 60% covenant limit.
- Assess the impact of the reduced 364-day facility size ($76 million decrease) on short-term liquidity planning.