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Amazon Looks to Debt Markets to Fund Whole Foods Acquisition

Amazon Looks to Debt Markets to Fund Whole Foods Acquisition

Thursday, August 17th, 2017

As Amazon moves ever closer to its prospective takeover of Whole Foods, the retailer has utilized a rare strategy for its operations to secure that next step. Amazon sold $16 billion of bonds earlier this week to help fund its Whole Foods purchase, according to The Wall Street Journal.

This debt sale is only the fourth for Amazon since 1998. Reportedly, this latest sale was met with strong demand from investors. The last time Amazon visited the deb markets was in December 2014, WSJ reported Dealogic as stating. 

Amazon Headquarters

WSJ also cited Dealogic as naming this sale as being the fourth-largest U.S. corporate bond deal this year. Moody’s Investors Service also affirmed earlier this week Amazon’s Ball rating, changing its outlook from positive to stable. Moody’s also stated that benefits of the upcoming acquisition outweighed the extra debt being taken on to fund the deal.

Amazon benefitted from favorable price adjustments across seven maturities. An anonymous person familiar with the deal stated that one of these transactions included a $3.5 billion 10-year bond sold at a 0.9-percentage-point-yield-premium to Treasurys. This was reportedly below the 1.1-percentage-point-guidance that was set earlier in the day by underwriters. The other six portions of the sold bonds ranged from 3 to 40 years.

Rajeev Sharma, Director of Fixed Income, Foresters Investment Management CompanyAmazon has relatively little debt outstanding compared to companies with similar credit ratings, “making it a good opportunity for a lot” of debt investors, as described by Director of Fixed Income at Foresters Investment Management Company, Rajeev Sharma.

As of June 30 and prior to this announcement, Amazon reported $7.68 billion of long-term debt, with more than $21 billion of cash and marketable securities.

Will this move yield more favorable results for Amazon as the Whole Foods acquisition moves closer? Deli Market News will provide the latest updates.