© Reuters. FILE PHOTO: A Boeing 737 MAX-10 lands over the Spirit AeroSystems logo during a flying display at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 22, 2023. REUTERS/Benoit Tessier/File Photo
By Chibuike Oguh
NEW YORK (Reuters) -Shares of Spirit AeroSystems (NYSE:) dropped nearly 15% on Wednesday, a day after the aerospace supplier unveiled debt and stock offerings to raise up to $400 million to bolster its dwindling balance sheet.
Spirit plans to raise $200 million via the sale of Class A common stock and issue $200 million in convertible debt maturing in 2028, the company said after the closing bell on Tuesday.
Its stock fell as low as $20.98 following the news, bringing its year-to-date losses to about 25%. It was last down 9.3% on the day.
The median price target of the 18 analysts covering Spirit is $29, up from $26 in October, and their current recommendation is “buy,” LSEG data showed.
A Spirit spokesperson did not immediately respond to a request for comment.
Spirit is a major supplier of large aircraft parts such as wings and fuselages for manufacturers including Boeing (NYSE:) and Airbus. Persistent production quality problems have slowed aircraft deliveries.
Last week, Spirit projected higher-than-expected cash burn for 2023, forcing it to slash anticipated deliveries of 737 fuselages. Free cash burn will range from $275 million to $325 million for 2023, up from a previous range of $200 million to $250 million, it said.
The company ended the third quarter with a cash balance of $374.1 million and debt of $3.8 billion.
Spirit’s capital raise is a “prudent move” that should bolster liquidity despite adding about $14 million in annualized interest expense and diluting its outstanding shares, Truist Securities analysts led by Michael Ciarmoli said in an investor note. Truist recommends holding the stock.
Spirit on Wednesday launched, as expected, a $1.2 billion debt offering for senior notes maturing in 2030. Net proceeds will be used to repay $1.2 billion of senior notes due 2025.
In October, Spirit named former Boeing executive Patrick Shanahan as interim chief executive, replacing Tom Gentile, who stepped down following a series of supply chain challenges and production defects. Shanahan is a former U.S. deputy secretary of defense.
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