Summary
Boeing announced a significant financial commitment on December 19, 2003, by intending to unconditionally guarantee $600 million in outstanding bonds previously issued by McDonnell Douglas Corporation. This action reflects Boeing's commitment to its obligations following the acquisition of McDonnell Douglas and aims to provide financial certainty for the bondholders of the acquired entity. Furthermore, Boeing has entered into a support agreement with its wholly-owned subsidiary, Boeing Capital Corporation (BCC). This agreement ensures Boeing will maintain a minimum ownership in BCC and will provide financial support if BCC's financial ratios (fixed charge coverage and net worth) fall below specified levels. This move is driven by BCC's strategic shift to primarily support Boeing products and services, indicating a consolidation of financial strategies and a move to bolster the subsidiary's financial stability in light of its focused operational role.
Key Highlights
- 1Boeing to unconditionally guarantee $250 million in 6 7/8% McDonnell Douglas bonds due November 1, 2006.
- 2Boeing to unconditionally guarantee $350 million in 9 3/4% McDonnell Douglas bonds due April 1, 2012.
- 3Total guaranteed debt from McDonnell Douglas is $600 million.
- 4Boeing will enter into a support agreement with its subsidiary, Boeing Capital Corporation (BCC).
- 5The support agreement mandates Boeing to maintain a minimum ownership in BCC.
- 6Boeing will provide financial payments to BCC if certain financial metrics (fixed charge coverage ratio, net worth) fall below minimums.
- 7The support agreement is designed to safeguard BCC's noteholders as BCC focuses on supporting Boeing products and services.