Please ensure Javascript is enabled for purposes of website accessibility Reportedly Floating Massive $18.5 Billion Debt Securities Issue

By Eric Volkman - May 10, 2021 at 7:39PM

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The proceeds will add to an already considerable cash pile.

Taking advantage of frothy debt markets, not to mention extremely low interest rates, (AMZN 2.07%) is apparently floating $18.5 billion in debt securities. That's according to a report published Monday by Bloomberg, citing "people with knowledge of the matter," which follows a preliminary prospectus filed by the company.

According to those sources, Amazon sold that amount of bonds in eight tranches. The largest of these is a 40-year bond which yields 95 basis points over Treasury securities, although Bloomberg did not specify which ones.

If the report is accurate, the $18.5 billion would be the retail giant's largest bond issue in history. It would also be the No. 2 in terms of size for 2021 behind Verizon's $25 billion flotation. 

An Amazon Delivery driver with a package.

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Once a model of an ambitious yet chronically loss-making disruptor, Amazon has become consistently profitable. It also has big reserves of cash -- holding over $34 billion at the end of March -- so tapping the debt markets doesn't seem to be a necessary solution to any of its challenges.

Rather, it likely senses an opportunity to amass a significant pile relatively cheaply, all the better to help fund its many initiatives and defend its powerful market position.

In that preliminary prospectus, Amazon wrote only vaguely that it will use its new borrowings "for general corporate purposes, which may include, but are not limited to, repayment of debt, repurchases of outstanding shares of common stock, acquisitions, investments, working capital, investments in our subsidiaries, and capital expenditures."

Amazon has not yet publicly commented on the article.

On Monday, its shares fell by nearly 3.1%, while the S&P 500 index slipped by only 1%.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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