Amazon has issued a $3 billion bond offering — Amazon’s first in more than a decade — to be used for general corporate purposes, including a $1.16 billion purchase of its South Lake Union headquarters complex. The first bond offering in more than a decade, is taking advantage of low borrowing costs to sell debt maturing in three, five and 10 years, according to a regulatory filing Monday.
Proceeds will be used for “general corporate purposes,” including a previously announced deal to buy its leased, 11-building headquarters for $1.16 billion.
“They’re just taking advantage of the ultralow interest rates right now to pad their cash position a little bit,” said analyst Dan Geiman of McAdams Wright Ragen in Seattle.
Amazon, which has no bonds outstanding, held $5.2 billion in cash and marketable securities at the end of September.
Moody’s Investors Service rated the bonds Baa1, three levels above speculative grade.
Amazon last sold debt in 1999, raising $1.25 billion of 4.75 percent, 10-year convertible notes, according to Bloomberg News.
The company, which Barron’s famously labeled “Amazon.bomb” in 1999, turned its first annual profit in 2003.
Five years later, with the economy headed for a recession, it paid off its long-term debt early.
Last month, Amazon announced its $1.16 billion deal with Vulcan Real Estate to buy its South Lake Union headquarters. It said Monday it made a nonrefundableable deposit of $51 million and expects to finalize the deal in the fourth quarter.
Amazon also is buying three blocks nearby from Seattle’s Clise family for new office towers in a sale expected to close by Dec. 31. At the same time, it’s expanding its distribution network to get closer to major population centers and is pushing into the hotly contested market for tablet computers with its Kindle Fire devices.
“Those are all areas that require investment,” said BGC Partners analyst Colin Gillis. “It’s timely to put cash on the balance sheet right now, given how historically low interest rates are.” [24×7]
According to the Beyond Trading Instablog:
- Amazon has been the most successful company in the world selling to its shareholders the idea profits do not matter. It’s all about a long term vision. Amazon Price/Earnings ratio is a mesmerizing 3,400 (PEG 89), compared to Apple 12.8 (PEG 0.58).
- Wall Street firms have been forced to buy the stock ahead of the bond offering guaranteeing an excellent outcome to Amazon shareholders with low risk. Amazon share price has been rallying hard despite the fact the company missed hard earnings estimates
- Timing of the announcement coincident with Cyber Monday sales numbers
- Goldman Sachs is listed as underwriter of the debt securities. Goldman Sachs is well-known for its scam games.
- Wall Street will not downgrade Amazon during this period.A big plus for Amazon shareholders who might benefit from momentum as Goldman Sachs plays its games. [24×7]