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25.06.2024
Spirit AeroSystems Yield Drops After Boeing and Airbus Deals
Spirit AeroSystems Yield Drops After Boeing and Airbus Deals
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Spirit AeroSystems' bond yield declined as Boeing and Airbus neared deals to acquire significant portions of its business, aiming to stabilize Spirit's finances and enhance operational efficiency following recent challenges.

The Spirit AeroSystems 9.375% Nov 2029 USD bond (USU84591AF05) saw its yield decline by 41 basis points to 6.6% over the past week.

Yield curve illustration showing the performance of the the Spirit AeroSystems bond (USU84591AF05) with a 9.375% coupon due in November 2029 in USD.

Boeing Co. and Airbus SE are nearing crucial agreements with Spirit AeroSystems Holdings Inc., aiming to take over significant portions of the aerospace supplier’s business. Airbus is expected to acquire Spirit's unit in Belfast, which produces wings for the A220 model, along with facilities in Kinston, North Carolina, and Saint-Nazaire, France, which supply components for the A350 and A320 models. Meanwhile, Boeing is set to reintegrate the bulk of Spirit's operations, including key production sites in Wichita, Kansas, pivotal for the 737 and 787 Dreamliner jets.

This strategic realignment comes after months of negotiations, aiming to stabilize Spirit's financial position and enhance operational efficiency following quality and manufacturing issues revealed by a 737 Max-9 incident in January. Spirit AeroSystems has faced mounting financial pressure, highlighted by a net loss of $617 million and a significant cash burn in the first quarter of 2024. The deals with Boeing and Airbus are seen as pivotal in alleviating these financial strains by ensuring continued demand and operational sustainability.

Boeing's reintegration of Spirit aims to secure the safety and quality of its supply chain, essential for its strongest-selling jets. Similarly, Airbus's acquisition of specific Spirit units seeks to safeguard the sourcing for its critical programs and establish a more sustainable operational framework.

On November 8, 2023, S&P Global Ratings maintained Spirit AeroSystems' issuer credit rating at 'B'. Meanwhile, Moody's assigned a B2 corporate family rating to the company, citing factors such as weak credit metrics, a varied history of execution, and imminent hurdles associated with the heightened production levels of crucial aerospace projects. Moody's also anticipates limited cash generation through 2025. The debt-to-EBITDA ratio persists at an elevated level, exceeding 10x.

The Yield Map for Spirit AeroSystems bonds denominated in USD as of June 24, 2024:

The Yield Map for Spirit AeroSystems bonds denominated in USD as of June 24, 2024.

About Spirit AeroSystems

Spirit AeroSystems Holdings, Inc. designs and manufactures aero structures for commercial and defense aircraft. Its operations encompass three segments: Commercial, Defense and Space, and Aftermarket. The Commercial segment produces fuselage sections, floor beams, nacelles, and stabilizers. The Defense and Space segment focuses on fixed wing aircraft, missiles, hypersonic systems, and rotorcraft. The Aftermarket segment offers spares, repair, and overhaul services. Founded in 2005, the company is headquartered in Wichita, Kansas. Spirit AeroSystems Holdings, Inc. has a market capitalization of $3.85 billion as of June 24, 2024.

This article does not constitute investment advice or personal recommendation. Past performance is not a reliable indicator of future results. Bondfish does not recommend using the data and information provided as the only basis for making any investment decision. You should not make any investment decisions without first conducting your own research and considering your own financial situation.
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