Two ratings services downgrade Boeing debt

Two US bond-rating services have downgraded Boeing's debt following the aircraft manufacturer's announcement that it will temporarily suspend production of the 737 MAX jet.

The downgrade of senior and short-term debt by a single notch likely means Boeing will cut the price of its bonds and pay more interest if it needs to borrow additional funds next year to cover expenses. Bond prices and yields move in opposite directions.

S&P Global Ratings took the action Thursday. Moody's did it Wednesday.

"The downgrades follow the extension of the grounding of the 737 MAX into 2020, the announced plan to shut down this important program for some interim period and the uncertainty and elevated risk — both financial and operational — for Boeing and its broader supply chain over the ensuring period," Jonathan Root, Moody's lead analyst, said in a research note to investors.

Suspending production of Boeing's top-selling plane could damage the company's reputation while payments to settle lawsuits from airlines for lost revenue due to grounding the MAX could erode future profit margins, Moody's said.

Boeing has set aside $5 billion to cover the claims.

However, Boeing's long-term outlook remains "stable" because it's a diversified company. It is also active in the defense sector, and growth in servicing existing equipment remains strong. But there will be "no upwards pressure" on the bond ratings until the MAX program returns to normal, Moody's said.

Boeing has about 4,500 MAX jets on order. Earlier this week, the company approved a regular quarterly dividend of $2.055 per share. Boeing is one of 30 stocks tracked daily that comprise the Dow Jones Industrial Average.

In October 2018, a MAX jet crashed in Indonesia, and in March 2019, another MAX crashed in Ethiopia. The two crashes killed all 346 passengers and crew onboard. All MAX aircraft have been grounded since March 2019.