Boeing at risk of being cut to junk status? The market did that a long time ago.
What, do credit rating agencies not read the news?
Boeing is on the verge of having its credit rating downgraded to junk by Moody’s amid a strike that’s crimping output.
Now, even if Moody’s cuts the company to junk, Boeing still retains investment grade ratings at S&P and Fitch, for now (though Fitch has also made some negative noises recently about the company’s financial position).
All these negative headlines aren’t doing anything good for the stock price, which has dropped to its lowest level since late 2022.
Losing an investment grade rating from the majority of credit agencies would make Boeing a “fallen angel” – and presumably the company would endure some forced selling from funds that can only hold investment grade debt (offset somewhat by some buying from funds that hold only junk bonds).
But it’s worth flagging that, for most of this year, the credit market had done a fine job treating Boeing like junk. And if anything, the company had been starting to move in the other direction, effectively starting to split the difference between the bottom tier of investment grade (BBB) and the top tier of junk (BB), at least by looking at its 30-year debt:
Caveat: when we’re talking about 30-year BB junk bonds, we aren’t exactly working with the largest sample.
The run up to the global financial crisis has shown us that the only companies that might be worse at internal quality control than Boeing are the rating agencies themselves. But I guess it’s also pretty wild a company that’s poised to make more than $20 billion in sales to the US government this year can still be considered so risky a business by some of the most serious bean counters around.
