Boeing’s latest headache: a possible junk downgrade

S&P Global Ratings may downgrade Boeing’s bonds due to cash issues amid a strike.

To add to Boeing’s list of troubles, S&P Global Ratings is considering downgrading its bonds because of the company’s growing cash problems amid a mass workers’ strike.

S&P, which grades corporate bonds based on the company’s ability to repay debt, put the planemaker on review for a possible downgrade to junk status because of how quickly it is using up cash, the agency said in a statement on Tuesday.

The junk status is given to bonds with a rating below BBB because they have a higher likelihood of failure to repay debts. A lower rating makes it more expensive for companies to borrow money than peers with higher ratings.

The credit ratings agency estimated that the strike puts Boeing’s recovery at risk and that the company will not reach its goal of increasing Boeing 737 Max production to 38 planes a month by the end of the year. S&P estimated that Boeing will use $10 billion in cash this year.

Boeing also has about $4 billion of debt due in April 2025, the agency said.

Last month, another credit agency, Moody’s, also put the company on a downgrade review, citing the strike and its impact on cash flow.

Boeing is nearing one month with 33,000 staff out. The strike immediately followed a vote in which workers in Washington and Oregon did not accept an agreement that Boeing and the labor union for machinists and aerospace workers proposed.

Talks between Boeing and union leaders broke down on Tuesday, two days after restarting.

Boeing has been scrambling to preserve crash in the wake of the strike by furloughing a “large number” of white-collar employees and saying that its leadership would take a pay cut for the duration of the strike. Boeing also barred employees from flying business class and implemented a hiring freeze.

The strike has halted production of the 737 Max, the company’s best-selling jet.

Besides financial troubles, Boeing has also been facing a series of reputational incidents this year over safety, after an incident where a plane’s door plug blew out in flight.

Boeing did not immediately respond to a request for comment, sent outside standard business hours.