What is the primary purpose of this new credit agreement?

The primary purpose of this new $1.0 billion, 364-day revolving credit agreement is to ensure Boeing has access to liquidity and maintain financial flexibility. It replaces an existing facility, indicating a proactive approach to managing its credit lines in the current economic environment.

What are the key financial restrictions imposed by this agreement?

The agreement contains a critical financial covenant that restricts Boeing from allowing its consolidated debt to exceed 60% of its total capital. Additionally, it includes restrictions on incurring new liens and on merging or consolidating with other entities.

How is the interest rate determined for borrowings under this agreement?

Borrowings will be subject to interest rates based on either a 'base rate' plus an applicable margin, or a Eurodollar rate plus an applicable margin. The 'applicable margin' is determined by the company's credit default swap mid-rate spread, with floors and caps dependent on Boeing's long-term senior unsecured debt rating.

What happens if Boeing defaults on any terms of this credit agreement?

If an event of default occurs (such as failure to pay, material misrepresentation, breach of covenants, cross-default with other debt, certain ERISA defaults, or bankruptcy), Boeing would be required to repay all outstanding borrowings immediately and would lose the right to borrow any additional funds under this agreement.

BA/BA-PA 8-K: Material Agreements & Financial Events

Summary

The Boeing Company (BA) filed an 8-K on November 20, 2008, reporting the execution of a new $1.0 billion, 364-day revolving credit agreement, effective November 14, 2008. This new facility replaces a similar one established in November 2007. The agreement was entered into with a syndicate of lenders, with Citigroup and J.P. Morgan acting as joint lead arrangers and book managers. This credit agreement is crucial for maintaining operational flexibility and access to liquidity, particularly given the prevailing economic conditions at the time. It includes standard covenants restricting actions such as incurring liens and mergers, as well as a financial covenant limiting consolidated debt to 60% of total capital. The filing details the interest rate structure, commitment fees, and events of default, which, if triggered, could necessitate immediate repayment of outstanding borrowings.

Key Highlights

1Boeing entered into a new $1.0 billion, 364-day revolving credit agreement on November 14, 2008.
2This agreement serves as a replacement for the prior $1.0 billion, 364-day credit facility from November 2007.
3Key financial institutions, including Citigroup and J.P. Morgan, are involved as arrangers and lenders.
4The credit agreement includes customary covenants related to liens, mergers, and consolidation.
5A significant financial covenant limits consolidated debt to 60% of total capital.
6The interest rate structure is based on a combination of a 'base rate' (or LIBOR) plus an applicable margin, which is tied to credit default swap spreads.
7Events of default are clearly defined and could lead to immediate repayment obligations and termination of borrowing privileges.

BOEING CO 8-K Report, Material Agreement (Nov 20, 2008)

Summary

Key Highlights

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