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Grounded airliners move Boeing's bonds wide


Reuters


NEW YORK, March 15 (IFR) - Boeing 737 Max 8 aircraft have been grounded in numerous countries worldwide over safety concerns, sending the company's bonds wider by double-digits across several of its secondary tranches.

A crash in Ethiopia on March 10 that killed all 157 on board marked the second such event involving the aircraft, following last October's Indonesian Lion Air crash, and raised doubts about one of Boeing's best selling jets.

Quickly following the crash, 42 countries including China, the whole of the European Union, Malaysia, Singapore, Australia, Ethiopia and Indonesia suspended flights made by the 371 aircraft across 51 airlines.

Boeing's 3.20% 2029s were among the most traded, breaking out to as much as 91bp over Treasuries, up from 60bp before the crash.

Longer-dated paper, such as the company's 3.825% 2059s, moved more drastically after the US followed suit, pushing the spread as wide as 124bp over Treasuries from 100bp.

In equities, one of the Dow's best performing stocks this year is taking a beating as Boeing's shares fell 11% through Thursday, according to Reuters.

Airline shares are starting to take a hit as well, especially for some of the largest carriers that use the aircraft, including Southwest Airlines with 34 in circulation, according to CreditSights.

The 737 Max airliner is one of Boeing's best sellers, accounting for around 79% of Boeing's total commercial order backlog, and the company was expecting to increase monthly production to meet those orders later this year.

Still, Boeing (rated A2/A/A) remains a highly defensive name, and most of its bonds are trading inside average Single A spreads of 97bp over Treasuries, according to ICE BAML data.

"We move to a hold recommendation from underperform on [Boeing] cash bonds, recommending investors ride out some of the near-term volatility and not sell into weakness," CreditSights wrote.

"The situation is developing, remaining fluid as investigations take their course over the next several weeks or months."






This article appears in: Stocks , Politics
Referenced Symbols: BA




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