Ratings agencies warn of downgrade if Boeing strike drags on

By Shivansh Tiwary

(Reuters) - Fitch and Moody's on Friday joined S&P Global Ratings in warning that a prolonged strike at Boeing's factories in U.S. West Coast may lead to a ratings downgrade, a headache for the planemaker that is saddled with massive debt.

"If the current strike lasts a week or two, it is unlikely to pressure the rating. However, an extended strike could have a meaningful operational and financial impact, increasing the risk of a downgrade," Fitch Ratings said.

Moody's warned of a downgrade if Boeing issues debt alongside any equity raised to meet its liquidity requirements, including the money it needs to retire about $12 billion of debt maturities between now and the end of 2026.

Moody's currently rates the planemaker at "Baa3", while Fitch has "BBB-" rating — both a notch above the junk status.

More than 30,000 workers walked off the job at Boeing on Friday after rejecting a contract deal, halting production of its 737 MAX jet, the company's main cash-cow.

CFO Brian West did not directly answer when asked if Boeing may need to raise debt or equity by the year-end or early 2025.

"First of all, we want to prioritize the investment grade credit rating. And secondly, we want to allow the factory and the supply chain to stabilize. That last objective just got harder based on last night," he said at a conference organized by Morgan Stanley.

"We are perfectly comfortable to supplement our liquidity position to support these two objectives," West said.

The first labor strike at Boeing since 2008 coincides with a period of intense scrutiny of the planemaker by U.S. regulators and airline customers after an incident in January when a door panel detached from a 737 MAX jet mid-air.

Boeing's management will likely need to access new sources of liquidity in the event of a prolonged strike to adhere to its cash targets and to remain within Fitch's negative rating sensitivity, the ratings agency said.

S&P Global Ratings had said on Thursday an extended strike could delay the planemaker's recovery and hurt its overall rating.

Boeing's finances are already groaning due to a $60 billion debt pile.

Shares of the planemaker were down 4% in afternoon trading, touching over an 18-month low.

(This story has been refiled to fix syntax, in the headline)

(Reporting by Shivansh Tiwary and Abhijith Ganapavaram in Bengaluru; Editing by Krishna Chandra Eluri, Shinjini Ganguli and Shilpi Majumdar)