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Amazon set a record in the corporate bond market on Monday, approaching the level of interest paid by the U.S. government than any U.S. company has previously managed in a fundraiser.
The e-commerce group raised $ 18.5 billion in bonds of eight different maturities, ranging from two to 40 years, according to people familiar with the deal. With its $ 2 billion bond, it paid just 0.1 percentage points more than the equivalent U.S. Treasury debt yield, a record according to Refinitiv data.
The additional return above the Treasuries paid by firms, or differential, is an indication of investors’ perception of the risk of lending to a firm against the supposedly risk-free rate of U.S. public debt.
Amazon, one of the fugitive winners of the pandemic, released its second consecutive quarter last week Revenues of more than $ 100 billion and said its net profit tripled in the first quarter from the same period a year ago, to $ 8.1 billion.
The company had $ 33.8 billion in cash and cash equivalents on hand at the end of March, according to a recent record, a high for the period.
“They don’t need cash, but the money is cheap,” said Monica Erickson, head of DoubleLine Capital’s quality corporate investment team in Los Angeles.
Differences have fallen sharply since the Federal Reserve intervened to prop up the good corporate market faced a severe sale produced by the pandemic, and now the average levels below those before the coronavirus.
This means that it is a very attractive time for companies to borrow cash from investors, even if they do not have an urgent need.
Amazon it also set a record differential lower on a 20-year corporate bond, 0.7 percentage points, beating Alphabet’s record borrowing costs compared to last year, according to Refinitiv data. It also matched the 0.2 percentage point spread first paid by Apple for a three-year bond in 2013 and fell from 0.47 percentage points paid by Procter & Gamble for a 10-year bond a year past.
Investor orders for Amazon fundraising fell below $ 50 billion, according to people, as a sign of rampant demand from U.S. corporate debt investors, although interest rates Growing interest rates have eroded the value of higher quality fixed rate bonds.
Highly valued U.S. corporate bonds still offer higher interest rates than most of the rest of the world.
Amazon’s two-year bond also had a sustainability label that 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.
It included a number of other potential uses for the remainder of the debt, including share repurchases, acquisitions and capital expenditures.
In a recent call to investors, Brian Olsavsky, chief financial officer, said the company would “invest heavily” in the “average mile” of delivery, which includes air freight and road transport, in addition to expanding its network. ” last kilometers “. home delivery vans and drivers.
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