Boeing Co. has received orders of about $14 billion from around 20 banks for a loan which will give the planemaker more financial flexibility to manage the fallout from its grounded 737 Max jetliners, Bloomberg News reported. On the earnings call yesterday, Boeing said that it had received enough commitments to enter into a $12 billion term loan facility. “Based on the strong demand, the size of facility could exceed this amount when the transaction closes in February,” said Chief Financial Officer Greg Smith. The loan deal is expected to close on Feb. 6. It was initially marketed at a size of $10 billion with potential to grow. Boeing revealed yesterday that total costs for the grounded planes will surpass $18 billion when the tab for restarting production later this year is included.
Boeing today said that the costs associated with the grounding of the 737 Max were likely to surpass $18 billion, a significant increase over earlier forecasts, the New York Times reported. The new estimate, announced during Boeing’s quarterly earnings report, is the company’s most recent approximation of just how expensive it will be to return the Max to service, compensate airline customers and restart the shuttered 737 factory. Boeing continues to grapple with the fallout from the crashes of two Max jets in 2018 and 2019, which killed 346 people, leading to the worldwide grounding of the plane in March. In addition to the rising costs, the company is contending with a new chief executive, the temporary shutdown of the 737 factory and a range of challenges in other parts of the business. Boeing on Wednesday said that the costs associated with shutting down and restarting the factory would amount to some $4 billion. The decision to temporarily halt production of the Max was only made last month, and Boeing had not previously given guidance on what the move would cost. The company also said that the cost of compensating airlines that have suffered lost sales as a result of the grounding of the Max was now expected to reach $8.3 billion, up from a previous estimate of $5.6 billion. That figure represents a mixture of cash payments to airlines, as well as discounts on future sales. And Boeing said that as a result of the grounding, which has lasted nearly a year now, it expected the overall cost to produce the 737 Max to rise to $6.3 billion in the years ahead, up from an earlier estimate of $3.6 billion. In total, the anticipated costs now equal more than $18.6 billion, or nearly 20 percent of Boeing’s annual sales before the Max was grounded.
Boeing has secured commitments of more than $12 billion in financing from more than a dozen banks, as the industrial giant shores up its balance sheet amid the nearly yearlong grounding of the 737 Max, CNBC.com reported. The manufacturer last week was trying to secure a loan of at least $10 billion, according to CNBC. The 737 Max was grounded after two crashes — a Lion Air flight in Indonesia in October 2018 and an Ethiopian Airlines flight last March — together killed all 346 people on board. The crashes handed Boeing one of the biggest crises in its more than 100-year history, one that has rippled through its supply chain and to its airline customers. The size of the loan, at least $2 billion more than originally sought, is a vote of confidence in the manufacturer from lenders. The financing will be a two-year delayed-draw loan, meaning that Boeing doesn’t have to use it all immediately, and is set to cost 100 points over Libor.
PG&E Corp. has reached an accord with bondholders that smooths its path out of bankruptcy, but it has yet to win over California Gov. Gavin Newsom, who has threatened a state takeover of the embattled utility, WSJ Pro Bankruptcy reported. Hours before PG&E announced a settlement with investors owning most of its $17 billion bond debt, Newsom lashed out in a court filing that warned the utility it won’t get out of bankruptcy without major improvements to its turnaround plan. Years of deadly wildfires linked to its equipment drove PG&E into chapter 11 protection last year. Bankruptcy shielded PG&E from continued lawsuits seeking damages from the blazes, but the barrage of criticism from Mr. Newsom and others has continued. PG&E paid out billions of dollars in shareholder dividends while skimping on safety investments, critics say. Newsom, who is playing a key role in PG&E’s bankruptcy effort, wants the utility to agree to new leadership and has asked the company to incorporate a mechanism that will allow the state special powers if the utility starts slipping up on safety again.
PG&E Corp. has struck a deal with financial firms that tried to take control of the company, but the outcome of its bankruptcy case still hinges on one key figure: Gov. Gavin Newsom, the San Francisco Chronicle reported. The parent company of Pacific Gas and Electric Co. said yesterday that it reached a settlement agreement with a group of bondholders, led by the hedge fund Elliott Management, to resolve a persistent and highly contentious bankruptcy dispute. In exchange for new debt that’s cheaper for PG&E, among other terms, bondholders have agreed to scrap a proposal that would give them a controlling stake in the company. PG&E said the deal would — if approved in court — save its customers about $1 billion. It’s a major milestone for PG&E, which is trying to maintain control over how its nearly yearlong bankruptcy case concludes. Yet further hurdles remain. Chief among them is Newsom, who yesterday renewed his threat to have the state take over PG&E. In court papers objecting to the financing PG&E wants to use to exit bankruptcy, Newsom’s attorneys said the company had “yet to make a single modification” that would address the “many deficiencies” with its plan to resolve the case. Read more.
Some of the most widely discussed ways to prevent the massive fires and blackouts that plague California may also be the most expensive, a Bloomberg News analysis suggests. For instance, burying all 81,000 miles of PG&E Corp.’s electrical distribution lines so they won’t spark blazes during windstorms could cost more than $240 billion, the analysis found. That’s based on a PG&E estimate that moving existing lines underground costs $3 million per mile. A state takeover of the troubled utility would also likely have a hefty price. The book value of PG&E’s electricity assets — the amount they’d cost if new — is $62 billion, according to the analysis. The state would almost certainly negotiate a lower price to account for depreciation, but it would also have to assume PG&E’s liabilities. The analysis underscores the immense challenges California faces as it pushes to end deadly wildfires and the sweeping, deliberate blackouts intended to prevent them. PG&E, the state’s largest utility, filed for chapter 11 last January facing $30 billion in liabilities from the blazes, which have erupted with increasing frequency as climate change fuels hot, dry weather. Read more.
Victims of longtime national team physician Larry Nassar moved to dismiss USA Gymnastics’ bankruptcy proceedings on Tuesday, a sign that the gymnasts and federation remain far apart in mediation talks to resolve legal claims stemming from sexual abuse by Nassar over a three-decade period, the Wall Street Journal reported. USA Gymnastics and the U.S. Olympic and Paralympic Committee have been sued by hundreds of women and girls who were treated by Nassar at his practice at Michigan State University, as well as dozens of gymnasts who competed for the U.S. Attorneys representing victims had been in mediation for more than two years in a bid to settle the suits, a tangled process that also encompassed attempts to resolve litigation between USA Gymnastics and its insurers, former national team coordinator Martha Karolyi, individual coaches, and the U.S. Olympic and Paralympic Committee, which oversees national governing bodies and athletes on the Olympic team. USA Gymnastics filed for bankruptcy in December 2018, which halted depositions and discovery in the lawsuits and disrupted formal efforts to revoke USA Gymnastics’ status as the sport’s official governing body by the USOPC. The measure had also opened the door for more people to file claims, and potentially be paid out in a more orderly manner under bankruptcy rules that allow troubled organizations to pool money from their assets. If the victims’ lawyers are successful in persuading the federal judge overseeing the proceedings in Indianapolis to drop the bankruptcy, the organization will once again confront the lawsuits filed in courts across the country and could also be exposed to new ones. Losing even one case could lead the organization to face an expensive judgment and the turnover of valuable property to pay for it, putting it in an even more dire financial state.
A deadline extension and an aggressive effort to track down victims have doubled the number of damage claims against Pacific Gas & Electric over California wildfires started by its equipment, the New York Times reported. A filing yesterday related to the giant utility’s bankruptcy case said that more than 80,000 people were now seeking to tap into a relief fund projected to total $13.5 billion. In his report, a court-appointed accountant charged with identifying and finding additional wildfire victims attributed the increased number of claims to, among other things, “grass-roots campaign efforts of the fire victims themselves.” Less than three weeks before the previous Oct. 31 deadline, the New York Times reported that about 31,500 victims had filed claims but that 70,000 others could lose out on benefits if they did not act quickly. Bankruptcy Judge Dennis Montali, who is presiding over the bankruptcy case, extended the deadline to Dec. 31. And U.S. District Court Judge James Donato, who is responsible for estimating how much PG&E owes wildfire victims, said: “It would be a heartbreaking shame if even 10 percent of the eligible victims don’t file claims for whatever reason. If we’re talking about 50 percent not filing, that’s — that’s intolerable.” Judge Donato suggested that “someone should be going door to door” to get victims to file claims.
The fate of the largest East Coast oil refinery is set to be decided on Friday in an auction that could determine whether the Philadelphia plant is restarted or used for a different purpose for the first time in over a century, Reuters reported. The refinery’s owner, Philadelphia Energy Solutions, is scheduled to reveal the winning bidder on Wednesday during a hearing at the U.S. Bankruptcy Court for the District of Delaware, which will need to approve the sale. PES filed for bankruptcy on July 21, a month after a fire and explosions destroyed a portion of its 335,000 barrel-per-day oil refinery complex. It wound down the roughly 150-year-old plant and laid off hundreds of workers over the following weeks. The PES site located less than three miles (5 km) from downtown Philadelphia has also attracted bids from several real estate developers. One of the groups proposed to model itself after the Philadelphia’s Navy Yard, which was turned into a campus for company headquarters, including clothing retailer Urban Outfitters, while operating a section for commercial shipping. Most of the bids from real estate developers involved keeping the site as an industrial operation.
Insys Therapeutics Inc., the first drugmaker driven to bankruptcy by fallout from the opioid crisis, won court approval of a bankruptcy plan that pays less than a dime for each dollar it owes to the people, cities, states and tribes claiming damage from the drug epidemic, WSJ Pro Bankruptcy reported. Shareholders of the once-thriving company will be wiped out under the chapter 11 plan approved Thursday by Judge Kevin Gross in the U.S. Bankruptcy Court in Wilmington, Del. Insys filed for chapter 11 protection in June, after reaching a deal with the U.S. Justice Department and seeing a raft of its former leaders convicted on federal racketeering charges. In bankruptcy, the company sold the rights to its flagship opioid, a form of the fentanyl painkiller called Subsys, and other pharmaceutical assets. OxyContin maker Purdue Pharma LP filed for bankruptcy in September. It is in better financial shape than Insys, and Purdue’s owners, the Sackler family, have offered to contribute $3 billion to pay off creditors, including the same cities, states and tribes that sued Insys and others involved in the opioid crisis.
