Wednesday, 11 March 2020 14:20

Boeing To Drawdown Full $13.8 Billion Revolver, Hinting At Imminent Bank Lending Freeze

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Boeing To Drawdown Full $13.8 Billion Revolver, Hinting At Imminent Bank Lending Freeze

For that generation of traders out there who were following the market back in 2007/2008, instead of their high school or college GPA, they will recall that one of the key inflection points in the global financial crisis 12 years ago was when banks started pulling revolvers to preserve liquidity.

Moments ago Boeing suggested that a similar moment is coming again: according to Bloomberg, the struggling aerospace giant which just a few weeks ago obtained an upsized revolver from various Wall Street sources to shore up its liquidity in the aftermath of the 737 MAX crisis, was planning to draw down the full amount of a $13.825 billion loan as early as Friday.

Why is Boeing taking this unprecedented step: after all, the cash is already committed and is far safer if held on bank balance sheets instead of Boeing's? According to Bloomberg, the full drawdown takes place as Boeing grapples with worldwide travel disruptions from the coronavirus, and "plans to draw the rest of the loan as a precaution due to market turmoil." That however doesn't explain why Boeing needs the cash on its balance sheet instead of its lender banks'. The answer - especially for those who recall what happened in 2008 all too well - is simple: Boeing is worried that banks will pull their committed funding, which in turn means that Boeing is either now worried that a 2008-style financial crisis is imminent, or that the company's own prospects are about to implode, forcing banks to breach their delayed draw credit facility document terms

As Bloomberg reminds us "Boeing obtained the loan from a group of banks last month to help it...

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