Amazon Sells $16 Billion of Bonds to Finance Whole Foods Deal
August 15 2017 - 7:34PM
Dow Jones News
By Sam Goldfarb
Amazon.com Inc. sold $16 billion of bonds Tuesday to help fund
its purchase of Whole Foods Market Inc., meeting strong demand from
investors as it made a rare trip to the debt market.
Amazon sold a $3.5 billion 10-year bond at a
0.9-percentage-point yield-premium to Treasurys, below the
1.1-percentage-point guidance set by underwriters earlier in the
day, according to a person familiar with the deal. The e-commerce
giant benefited from similarly favorable price adjustments across
six other maturities, ranging from three-years to 40-years, the
person said. In its entirety, the sale added up to the
fourth-largest U.S. corporate bond deal of the year, according to
Dealogic.
Earlier this week, Moody's Investors Service affirmed Amazon's
Baa1 rating and changed its outlook to positive from stable, saying
the benefits of the Whole Foods acquisition outweighed the extra
debt being taken on to fund the deal. The debt sale is just
Amazon's fourth since 1998 and first since December 2014, according
to Dealogic.
Compared with other companies with similar credit ratings,
Amazon has relatively little debt outstanding, "making it a good
opportunity for a lot" of debt investors, said Rajeev Sharma,
director of fixed income at Foresters Investment Management
Company.
Excluding lease obligations, Amazon reported $7.68 billion of
long-term debt and more than $21 billion of cash and marketable
securities as of June 30.
Expected to close in the second half of the year, Amazon's
purchase of Whole Foods has the potential to reshape the grocery
industry as the company makes its first major entry into brick and
mortar. Amazon has said little about plans for the more than 460
stores it is acquiring, in part because the deal came together in
about six weeks. But former Amazon executives expect it to reduce
prices, integrate some back-end operations and add some Prime
membership benefits.
Amazon has struggled to gain a foothold in the grocery industry
for years. Meanwhile, traditional grocers such as Kroger Co. and
Albertsons Cos. have been struggling with volatile food prices and
competition from discounters.
The company is taking advantage of favorable borrowing
conditions. As of Monday, the average yield premium on
investment-grade corporate bonds relative to Treasurys was 1.11
percentage points, not far above the post-financial crisis low of
0.97 percentage point set in 2014, according to Bloomberg Barclays
data.
Amazon's existing 4.8% bonds due 2034 traded Tuesday at just
below 113 cents on the dollar, translating to a yield-premium to
Treasurys of 0.93 percentage point, according to MarketAxess.
--Laura Stevens and Justina Vasquez contributed to this
article.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
August 15, 2017 19:19 ET (23:19 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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