Amazon (AMZN) Announces Pricing Of Senior Notes Worth $16B
Zacks Investment Research | Aug 17, 2017 08:38AM ET
The world’s largest online retailer, Amazon.com Inc. (NASDAQ:AMZN) , recently announced a private offering of bonds aggregating $16 billion.
According to Informa Global Markets, this is the fourth largest high-grade debt offering of 2017. These bonds have been issued in seven tranches of different amounts and maturities, ranging from three-year notes to 40-year notes.
Bank of America Merrill Lynch (NYSE:BAC), Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) will act as lead underwriters for the offering.
Price Movement
Amazon is one of the leading players in the extremely fast-growing retail ecommerce market and its strength lies in its huge scale of offerings, its broad reach and platform approach.
However, Amazon has underperformed the industry on a year-to-date basis. During this period, the company’s shares have increased only 30.4%, lower than the industry ’s gain of 46.4%.
The underperformance could be due to a spike in operating expenses as a result of buildout of fulfillment centers in preparation for the holiday season. The company’s increased spending on original TV shows and movies and offline retail has also been impacting its profits.
Reason for the Debt Issue
Amazon stated that the transaction proceeds will be used to fund its acquisition of Whole Foods Market, Inc. The amount will also be used to repay its 1.200% notes due 2017, and for general corporate purposes.
In June, Amazon had announced that it had reached a deal to acquire leading natural and organic foods supermarket, Whole Foods Market, Inc. (NASDAQ:WFM) for $13.7 billion. The deal, which is expected to conclude in the second half of this year, will open a window of opportunities for Amazon in the retail market. The deal will also help it counter competition, if it manages to get a first-mover advantage.
Amazon’s Cash Position
As of Jun 30, 2017, the company had total debt of $7.7 billion. Its cash equivalents and marketable securities balance were almost $21.45 billion, slightly down from the prior quarter. Also, the company generated $3.8 billion of cash from operations, spending $2.5 billion on fixed assets (including internal-use software and website development costs) and $633 million on acquisitions. Principal repayments of capital lease obligations were $1.2 billion in the second quarter.
The new debts will carry a fixed rate of interest and will help the company to lower interest burden compared with the floating rate in the credit facility.
Get The News You Want
Amazon.com, Inc. Price and Consensus
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.