Moody's affirms Boeing's A2 senior unsecured rating, changes outlook to negative
Moody's Investors Service announced that it has affirmed the A2 senior unsecured and P-1 short-term ratings it assigns to Boeing and the A2 senior unsecured rating it assigns to Boeing Capital Corporation, the debt of which Boeing guarantees. The outlook for both entities was changed to negative from stable. Moody's said in part: "The change in outlook to negative principally reflects that the grounding of the company's 737 MAX aircraft will run longer than we had expected, which will compound its operational disruption, costs and the size of the investment in working capital as production remains at a substantial rate of 42 per month. The negative outlook also contemplates the execution risk in returning the narrow-body franchise to normalcy following the grounding's end, which remains uncertain, and the timeframe for repaying the debt incurred to fund the grounding and restore confidence in the all-important MAX program, and in Boeing, more broadly...Financial risk relative to the company's pre-grounding profile has meaningfully increased, and the resolution and ultimate impact for Boeing, both financially and reputationally, remain unknown. The negative outlook incorporates Moody's projection of negative free cash flow of $5B or more in 2019, and the execution risk regarding Boeing's ability to generate positive free cash flow in excess of $10B in 2020, assuming deliveries re-start by January 2020 and no new capital-consuming issues arise."