Even within the giant U.S. stock market, it's not every day that a company announces an 11-figure bond issue. Monday was an exception, with Amazon (AMZN 1.67%) floating $12.75 billion of debt. For a company of Amazon's size, that's quite a bit of scratch, and investors responded to the news by trading its stock down by more than 2% on the day.
Amazon's unsecured senior debt was issued in seven parts, all of which have different coupons and maturities. These range from 2.73% notes maturing in 2024 to 4.1% notes coming due in 2062. At least the interest payments are consistent throughout the series; for each, those disbursements will be effected on April 13 and Oct. 13 of every year starting this October.
In its prospectus on the notes, the retail sector giant wrote that it aims to use the proceeds
for general corporate purposes, which may include, but are not limited to, repayment of debt, acquisitions, investments, working capital, investments in our subsidiaries, capital expenditures, and repurchases of outstanding shares of our common stock.
Any, and even all, of those uses are necessary for Amazon's functioning. At the end of 2021, the sprawling company had over $116 billion of outstanding debt to service. And in mid-March, it closed an $8.5 billion deal for what's effectively a big film and TV content warehouse, MGM.
At the same time, though, Amazon's encouraging recent fundamentals give the company balance-sheet strength. Its pile of cash and short-term investments rose to over $96 billion at the end of last year, a massive amount that was 11% higher year over year.
Yes, $12.75 billion is a considerable figure and yes, interest rates aren't as low as they used to be. But considerable figures are the rule and not the exception for Amazon, and the company has more than enough financial muscle and growth potential to handle them. The stock's bulls shouldn't fret about this move.