Boeing Seeks U.S. Aid Plus Help for Suppliers, Airlines on Virus

[Giant Bird]

Bailout Conditions

If I was secretary to the treasury one of the conditions I would make on a bailout would be that in return for guaranteeing loans for Boeing that they grant the government
100 mill stock options to be exercised at the lowest closing price between immediately before the bailout and the day the loans are fully paid off, exercise able by the government for up to 5 years after the loans are fully paid.
That way

• Boeing gets the cash to stay afloat and keep employing their employees and keeping buying parts from suppliers
• Boeing gets to borrow the funds much cheaper than they would otherwise pay with their reduced capital base and lower credit rating.

1. Boeing conserves cash as there is no cash cost to Boeing in issuing the stock options to the government
2. The indirect cost of issuing the options is an opportunity cost in future stock price increases borne by the shareholders and executives who previously benefited from the share buy backs which helped weaken the company capital structure.
3. The government gets rewarded for its generosity in providing a financial guaranteed for Boeing by taking a profit on the options when the stock price recovers due to the government help.
4. When the share price recovers the shareholders have to share the gains with the government due to the stock options it holds.
5. When the government exercises their stock options Boeing gets a capital boost.

Boeing says they cannot borrow the money without government help. This is not strictly true. There is always someone who will lend you money. It is just the interest rate they want to charge you for the risk. In the case of Boeing the perceived risk gets higher ever day so does the interest rate.In retrospect when they went to the banks in January they should have borrowed more than the 13 b they took.