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Boeing plans to draw down full $13.8bn revolver

By Lawrence Gash

Move suggests potential bank lending freeze on the cards

US aircraft manufacturer and defence contractor Boeing (BA) is reportedly planning to draw down on the full amount of a $13.8bn (£10.7bn, €12.2bn) loan it obtained last month, in order to strengthen its liquidity in the wake of the 737 MAX crisis.

A source familiar with matter informed Bloomberg that the almost-$120bn company has decided to call on the full amount “as a precaution due to market turmoil.”

Markets have plunged further this week as the Covid-19 virus continues to spread across Europe and North America, with the start of an oil price war between Saudi Arabia and Russia further compounding losses.

Boeing’s decision to draw down the full amount has reminded some observers of the 2008 financial crisis, during which banks pulled revolvers in order to preserve liquidity. It is thought that the US firm is either trying to get ahead of such a development in the wider market, or it's yet further evidence of turbulence in its own operations.

After two crashes in late 2018 and early 2019, civil aviation authorities have grounded Boeing’s entire 737 MAX fleet, costing the firm billions.

Boeing’s share price has fallen almost 45 per cent in the past year alone. In mid-morning US trading (EST) the company stands at $207.20, a daily drop of 10.31 per cent, making it the Dow Jones’ biggest loser thus far.

There is growing speculation that the full $13.8bn loan could not be enough to help the major American corporation. The loan was approved in order to help Boeing cope with the 737 MAX crisis and before Covid-19 began to fully wrack global markets.

With airlines among the foremost losers in the past month, thanks to widespread shutdowns, cancelled conferences and a marked decline in tourist traffic, orders for new Boeing aircraft could fall as a result.

FURTHER READING: Boeing internal messages say 737 MAX is 'designed by clowns'

FURTHER READING: UK Budget: Chancellor dedicates £30bn to limit 'significant impact' of coronavirus on economy

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