(Bloomberg) — Amazon.com Inc. is selling $12.75 billion in investment-grade bonds for general corporate purposes that may include debt repayment, acquisition financing and share buybacks on its first bond sale in about a year.
The online retail giant is selling senior unsecured bonds in seven parts. The longest part of the offering, a 40-year instrument, will yield 1.3 percentage points on Treasury bonds after initial talks of around 1.55 percentage points, according to one person with knowledge of the matter, who asked not to be identified because the details are private.
Amazon last turned to the US debt market when it sold $18.5 billion in bonds in May, also for general corporate purposes that included possible debt refinancing and share buybacks. The 40-year instrument in that agreement was placed with a yield of 95 basis points on Treasury bonds.
While yields have increased since its last issue, selling debt now makes sense because borrowing costs may increase even more as the Federal Reserve fights inflation and adjusts the money supply.
Even if it re-enters the investment-grade debt markets, Amazon's credit quality is likely to continue on a trajectory of improvement, Robert Schiffman, senior credit analyst at Bloomberg Intelligence, wrote in a note. The company's balance sheet is growing and with $50 billion in bonds in circulation, it could approach industry leader Apple Inc.'s debt of more than US$100 billion in the medium term, he added.
Amazon's cash, cash equivalents, and marketable securities reached an all-time high of $96,000 at the end of 2021.
The company also has big business ambitions, including opening new warehouses, expanding its traditional grocery operations, and sending broadband streaming satellites into space.
In February, Amazon stunned Wall Street with a strong earnings report. While sales of the online store actually declined from the previous year's pandemic-driven profits, the company's profitable cloud computing and advertising businesses combined to more than offset the decline.
Even so, the company spent a lot over the Christmas period to ensure that packages reached customers amid supply chain bottlenecks and severe labor shortages. Much of that expenditure was spent on hiring 140,000 workers. Amazon also gave bonuses to workers, sent half-empty vehicles if it meant delivering packages to customers on time, and secured space on any ship it could find, a wave of expenses that amounted to $22.4 billion.
In March, Amazon announced a 20-to-1 share split and a $10 billion share buyback authorization that caused the stock to skyrocket.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley are managing Monday's bond sale.
Original Note:
Amazon to Sell $12.75 Billion of Bonds in Seven-Part Deal (3)
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