Timing is everything.
It is not often that a company takes on $18.5 billion of new debt without disclosing any specific use for the proceeds and sees its credit rating upgraded. But then, it is not often that a company reports $108.5 billion of revenue for a single quarter.
That’s how much Amazon brought in for the first three months of 2021. Days after announcing this, along with a tripling of net income per share compared with the first quarter of 2020 and trailing 12-month operating cash flow of $67.2 billion, Amazon descended on the bond markets. On May 10, it sold an eight-tranche deal across two-, three-, five-, seven-, 10-, 20-, 30- and 40-year maturities.
Amid rising fears of inflation, debate over when the US Federal Reserve might start tapering bond purchases and growing concern about duration exposure, it seemed a risky moment to sell long-maturity bonds.
However, just as the four joint bookrunning managers began rounding up orders, Moody’s upgraded the company from A2 to A1. Its A1/AA- ratings put the company towards the strongest end of investment-grade credit.
Investors appeared unconcerned by the structural subordination of taking on holding-company obligations rather than debts of Amazon’s operating subsidiaries with all the revenues and assets.
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