Six entities from around the world make up the striking list behind the giant’s latest syndicated loan
Amazon has rounded up some unusual suspects. The e-commerce goliath recently added an $8 billion loan to its growing debt pile. This extra financing is curious, but not as curious as the foreign banks that provide it.
Slowing growth, weakening profitability and planned acquisitions including 1Life Healthcare and iRobot are reshaping Amazon’s balance sheet and creating new demands on its resources. It had nearly $60 billion in cash and easy-to-sell securities as of September 30, but it also spent about $20 billion of free cash in the 12 months ending in the third quarter. Against this backdrop, raising $8bn, shortly after securing a $10bn term loan in November, seems intuitive to boss Andy Jassy.
Less intuitive is the list of funders. After turning first to the main market intermediaries, Amazon has enlisted Canada’s TD Securities to search the roads less traveled on Wall Street for the next deal. The Australian ANZ, Bank of China, the French Crédit Agricole, BBVA, the British NatWest and the Singaporean DBS agreed to lend to Amazon for 364 days at 0.75% above the reference rate (Secure Overnight Financing Rate, SOFR), plus an additional credit spread adjustment of 0.1%. The loan is for general corporate purposes, and if Amazon chooses to extend it for another 364 days, the interest rate increases to SOFR plus 1.05% and adjustment.
The six selected banks participated in a total of 167 US corporate loan issuances last year worth just $36 billion, according to Refinitiv data, compared to 3,650 operations by Bank of America, JP Morgan and Wells Fargo, for a combined amount of 1 billion. Also joining Amazon’s newest consortium was mid-tier Japanese competitor Mizuho Financial.
It’s easy to understand why applicants rush to work with Amazon. Although its credit profile has slumped somewhat — retained cash flow, a post-dividend metric used by Moody’s, has fallen below 50% of net debt — it is a brand-name borrower with an investment-grade rating. . Some of the members of the latter consortium will have access to cheap financing. Others, like BBVA, which divested its US subsidiary but kept its brokerage business, are willing to expand into investment banking in the country.
For Amazon, spreading the wealth is an opportunity to test out new banking relationships before potentially hiring them for more complicated matters. Or, at least, that was the carrot he was probably offering. In reality, it’s easier to break into the online retail market dominated by Amazon than it is to break into the American financial firmament.
