The e-commerce group has raised $ 18.5 billion in debt on bonds of eight different maturities, ranging from two to 40 years, according to people familiar with the deal. On its two-year billion-dollar bond, it paid only 0.1 percentage point more than the yield on equivalent US Treasury debt, a record according to Refinitiv data.
The additional yield above corporate paid treasury bills, or spread, is an indication of investors’ perception of the risk of lending to a company relative to the assumed risk-free rate on US government debt.
Amazon, one of the runaway winners in the pandemic, released its second consecutive quarter of more than $ 100 billion in revenue last week and said its net income tripled in the first quarter compared to the same period there. a year, to $ 8.1 billion.
The company had $ 33.8 billion in cash and cash equivalents at the end of March, according to a recent filing, a high for the period.
“They don’t need cash, but money is cheap,” said Monica Erickson, team leader for blue chip companies at DoubleLine Capital in Los Angeles.
Spreads have narrowed significantly since the Federal Reserve stepped in to shore up the corporate bond market in the face of a pandemic-driven selloff, and now average levels lower than before the coronavirus.
This means that now is a great time for companies to borrow money from investors, even if they don’t have an urgent need for it.
Amazon also set a record for lowest spread on a 20-year corporate bond, 0.7 percentage point, breaking Alphabet’s record cost of borrowing from a year ago, data shows. by Refinitiv. It also matched the 0.2 percentage point spread initially paid by Apple for a three-year bond in 2013 and fell slightly less than the 0.47 percentage point paid by Procter & Gamble for a bond. at 10 years old last year.
Investor orders for Amazon’s fundraising fell just below $ 50 billion, people say, a sign of surging investor demand for U.S. corporate debt, even as interest rates hike. Interest has eroded the value of higher quality fixed rate bonds.
Well-rated US corporate bonds still offer higher interest rates than the rest of the world.
Amazon’s two-year bond also carried a sustainability label that has become increasingly attractive to investors. The company said the money would be used to fund projects in five areas, including renewable energy, clean transportation and sustainable housing.
He listed a number of other potential uses for the rest of the debt, including stock buybacks, acquisitions, and capital spending.
On a recent investor call, Brian Olsavsky, chief financial officer, said the company would “invest heavily” in the “middle mile” of delivery, which includes air freight and road transport, in addition to expanding its “last mile” network of home delivery vans and drivers.