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Amazon hit a record high on the corporate bond market on Monday before approaching the level of interest paid by the U.S. government than any U.S. company managed in a fundraiser.
The e-commerce group had a debt of $ 18.5 billion in bonds with eight different maturities, ranging from two to 40 years, according to people familiar with the deal. With a $ 2 billion two-year bond, it paid 0.1 percentage points more than its U.S. Treasury debt yield, according to Refinitiv data.
The additional return or spread on corporate-paid treasury is an indicator of investors ’perception of the risk that investors face in borrowing from a company in the face of the presumed risk-free rate of U.S. government debt.
Amazon, one of the fugitive winners of the pandemic, released it last week for the second consecutive quarter An additional $ 100,000 million in revenue and said its net profit tripled in the first quarter of three years ago from a year ago 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, the highest for the period.
“They don’t need money, but the money is cheap,” said Monica Erickson, head of the Los Angeles-based corporate investment group DoubleLine Capital.
Estimates have dropped dramatically since the Federal Reserve went ashore corporate bond in the face of severe pandemic sales in the market, and now the average levels were before the coronavirus occurred.
This means that it is a very attractive time for companies to lend money to investors, even if they do not have an urgent need.
Amazon it also set a record for the lowest expansion in a 20-year corporate bond, 0.7 percentage points, beating Alphabet’s record borrowing costs last year, according to Refinitiv data. It also coincided with a 0.2-point difference paid by Apple for a three-year bond in 2013, and last year Procter & Gamble shrank from the 0.47 percentage points paid for a 10-year bond.
According to people, Amazon’s fundraising demand for investors was $ 50 billion, a sign of the high demand from investors for U.S. corporate debt, even as interest rates have eroded the value of higher quality fixed rate bonds.
Higher corporate ratings in the U.S. offer much higher interest rates around the world.
Amazon’s two-year bond also had a sustainability label, which has become increasingly attractive to investors. The company said the money will be used to fund projects in five areas, including renewable energy, clean transportation and sustainable housing.
He listed other potential uses for the remaining debt, including the purchase of shares, purchases and capital expenditures.
In a recent investor call, Brian Olsavsky, chief financial officer, said the company will make “significant investments” in “half a mile” of delivery, including air cargo and road transportation, in addition to expanding its “last mile” network. vans and home delivery drivers.
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