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Amazon is offering investment-grade bonds for general corporate purposes that may include repaying debt as well as funding acquisitions and share buybacks in its first note sale in about a year.
The online retail giant is selling senior unsecured bonds in as many as seven parts, according to a person with knowledge of the matter. The longest portion of the offering is a 40-year security that may yield 1.55 percentage points over Treasuries, said the person, who asked not to be identified as the details are private.
Amazon last tapped the US debt market when it sold $18.5bn (R270bn) of bonds in May, also for general corporate purposes that included possible refinancing of debt and share repurchases. The 40-year security on that deal priced to yield 95 basis points over Treasuries.
While yields have jumped since then, selling debt now makes sense because borrowing costs may be headed even higher as the Federal Reserve fights inflation and tightens the money supply.
In February, Amazon wowed Wall Street with a strong earnings report. While online store sales actually declined from last year’s pandemic-fuelled gains, the company’s profitable cloud-computing and advertising businesses combined to more than make up for it.
Still, the company spent heavily in the holiday period to ensure packages got to customers amid supply-chain bottlenecks and an acute labour shortage. A lot of that spending went into hiring 140,000 workers. Amazon also lavished bonuses on workers, dispatched half-empty vehicles if it meant getting packages to customers on time and secured space on any ship it could find — a spending spree that totalled $22.4bn.
In March, Amazon announced a 20-to-1 stock split and a $10bn share-buyback authorisation that sent the stock soaring.
Goldman Sachs, JPMorgan and Morgan Stanley are managing Monday’s bond sale.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.