AMZN Amazon.com Inc

By Sam Goldfarb 

Amazon.com Inc. is on track to sell as much as $16 billion of bonds Tuesday to help fund its purchase of Whole Foods Market Inc., making a relatively rare trip to the debt market as it looks to become a major player in the grocery industry.

Amazon is expected to draw large demand for its bond offering, some investors said. The company is already a dominant figure in the retail sector, generating billions of dollars in cash flow annually, and the debt sale is just its fourth since 1998 and first since Dec. 2014, according to Dealogic.

Investors said they expect Amazon to sell around $14 billion to $16 billion of bonds across seven different maturities, ranging from three to 40-years. That puts the offering on track to become 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.

Compared to 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 online retail giant makes its first major entry into brick-and-mortar. The company has so far said little about its 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 backend operations and add some Prime membership benefits.

Amazon has struggled to gain a foothold in the grocery industry for years due largely to the regular nature with which consumers shop for food, although it still has a tiny portion of overall sales. 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 0.92 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 12:49 ET (16:49 GMT)

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