Credit-rating agency Standard & Poor’s has cut Boeing’s credit rating to BBB-, the lowest rating it can have before its debt topples into junk-bond status.
“Boeing’s earnings and cash flow over the next few years are likely to be lower than we had previously expected due to the impact of the coronavirus on aircraft demand, with the pace of recovery in air travel still highly uncertain,” said S&P in the downgrade note.
It is the lowest rating on Boeing’s debt since 1981. Boeing has never had its debt judged to be so risky that it considered “speculative” or “not investment grade,” the technical names for junk bond status.
“Certainly, we’d prefer to stay investment grade. And again, I think we’re taking all the right actions to try to maintain that,” said Boeing CFO Greg Smith when asked about the risk of Boeing falling into junk bond status after the company announced a $1.7 billion core operating loss in the first quarter on Wednesday.
Boeing added $11.6 billion in long-term debt during the first quarter to increase the cash it has on hand to weather the current crisis, which has seen airlines cancel or delay orders for new planes from Boeing and rival Airbus. The cost of its future borrow could go up due to this downgrade, and it could go up significantly more if its debt is downgraded again into junk bond status.