NEW YORK / WASHINGTON (Reuters) – In just six weeks, Boeing Co TO PROHIBIT went from asking for government help to announcing that it no longer needed it.

The company’s $ 25 billion bond issue this week made all the difference.

The oversized deal, this year’s largest high-grade bond issue and the sixth-largest on record, exceeded Boeing’s expectations. This highlights how the Chicago-based company has capitalized on support from the US government, even without having to accept taxpayer dollars as aid.

On March 24, Boeing CFO Greg Smith told Reuters in an interview that credit markets were “essentially closed” to the largest US aircraft manufacturer and that the entire US aerospace industry was in need. urgent need for capital to deal with the fallout from the coronavirus epidemic. .

A $ 2.3 trillion US stimulus package, enacted in late March to relieve the US economy that has been hit hard by the pandemic, then gave $ 17 billion in aid to Boeing and other critical businesses to national security.

Boeing itself had lobbied a lot for help and asked for at least $ 60 billion in government loans for the entire aerospace manufacturing industry. “We can’t let anything happen to Boeing,” US President Donald Trump said last month, in one of many instances where he has expressed support for the company.

Several bond investors in talks with Reuters cited the U.S. government’s support for Boeing, as well as the Federal Reserve’s support for credit markets in the aftermath of the pandemic, as reasons for the success of the capital increase.

“Boeing is quite vital, not only for the US economy, but also for national security interests. Plus, you can’t dispute (with the fact that) the Fed’s backing is what has been the main driver of what allowed risky assets to thrive, ”said Mark Heppenstall, chief investment officer at Penn. Mutual Asset Management.

Already grappling with $ 39 billion in debt at the end of March, Boeing began the week chasing cash, not only to deal with the impact of the coronavirus outbreak on air travel, but also the long immobilization of its flagship 737 Max aircraft, following a series of accidents.

Smith and Boeing chief executive David Calhoun had taken what they called a “balanced” approach, reiterating on Wednesday that they were exploring a mix of government aid and trade finance.

One potential source of government assistance, the $ 17 billion national security fund administered by the US Treasury Department, came with important conditions, including the ability for the US government to acquire a stake in Boeing. This could have led to the dilution of Boeing shareholders.

Then Boeing made a breakthrough. His plan was to gauge investor interest in a bond issue of between $ 10 billion and $ 15 billion, according to people familiar with the deliberations. Still, demand for bonds peaked Thursday at more than $ 70 billion on more than 600 investor accounts, the sources said.

Credit rating agencies have told Boeing it could borrow up to $ 25 billion through a bond issue and roughly maintain its quality rating, the sources say.

It was important for Boeing to control its borrowing costs and attract more investors to the bond offering, the sources said. According to the sources, investors who traditionally invest in debt rated as hedge funds, such as hedge funds, have also flocked to the Boeing bond issue because it was priced higher than high-grade deals.

Boeing has valued different tranches of bonds spanning multiple maturities between 450 basis points and 593 basis points, while the average spread of Boeing’s rating bonds is 306 basis points, according to ICE BofA Data.

“Let’s face it, Boeing is not an investment grade company by any stretch of the imagination,” said Nick Maroutsos, co-head of global bonds at Janus Henderson Investors.

Boeing declined to comment on its internal planning for the capital increase.

But Boeing said Thursday that due to the strong response to its bond offering, it “does not plan to seek additional funding through capital markets or US government options at this time.”

CONCESSION

Boeing had to make concessions to cajole rating agencies and bond investors. He agreed to increase interest payments by 25 basis points every time the two largest credit rating agencies downgraded its rating one level to “junk,” according to the bond issue’s prospectus. It capped these concessions at 100 basis points per rating agency and 200 basis points in total.

Boeing expects the money from the bond issue to cover its financing needs for the year, barring an unforeseen event. Before announcing that he would no longer be asking for government help, he stress-tested his financial assumptions and envisioned many scenarios to ensure he had cash flow for the rest of the year, according to the clients. sources.

Boeing has also had to take several cost-cutting measures, including announcing its intention to cut around 16,000 jobs this year, or around 10% of its workforce, through early retirement and likely layoffs.

Smith told Boeing employees in a message on Friday that he wanted to “thank the administration for the steps it has taken to support our economy and credit markets.”