Boeing to pay Embraer $150 million for scuttled combination

Boeing Co. will pay Embraer SA $150 million for its failed combination with the Brazilian aircraft maker, forcing the U.S. company to hand over funds at a time when it’s trying to prop up its balance sheet.

The arbitration proceedings have ended and an agreement been reached, Embraer said in a stock exchange filing on Monday. Boeing walked away from the proposed $4.2 billion transaction at the height of the COVID-19 pandemic.

“We’re pleased to have concluded the arbitration process with Embraer,” Boeing said in a statement.

Boeing is currently working to secure a deal with its workforce after the main union in the Seattle manufacturing hub voted to strike, shutting down its main planemaking facilities in the area. The company, which has more than $45 billion in net debt, has been bleeding cash after it was forced to pare back output in the wake of a near catastrophic accident in January.

A combination with Embraer would have given Boeing access to the Brazilian company’s engineers to design a new, mid-range jet family as well as its existing range of smaller jets that compete against arch-rival Airbus SE’s smallest A220 model. The termination of the deal came at a time when Boeing’s then-Chief Executive Officer Dave Calhoun said the company would need to adjust to a “new reality” as travel demand collapsed and airlines expected a slow recovery.

Last week, Moody’s said it was reviewing Boeing’s ratings for a possible downgrade and that it “will assess the strike’s duration and impact on cash flow and the potential equity capital raising Boeing may undertake to bolster its liquidity.” A descent into junk territory would increase Boeing’s borrowing costs at a time when it’s struggling to turn around its operations.