E-commerce giant Amazon (NASDAQ:AMZN) has entered into an agreement with multiple lenders, including DBS Bank and Mizuho Bank, to obtain an $8 billion unsecured loan. The term loan’s maturing period is 364 days, although there is an option to extend it for an additional time frame of 364 days.
“Given the uncertain macroeconomic environment, over the last few months we have used different financing options to support capital expenditures, debt repayments, acquisitions, and working capital needs,” an Amazon spokesperson told Reuters in a statement.
The initial interest rate on the term loan will be the secured overnight financing rate plus 0.75%. If extended, the interest rate spread will increase from 0.75% to 1.05%. In an SEC filing, Amazon disclosed that the term loan proceeds will be used for general corporate purposes. The company had long-term debt of $58.9 billion as of September 30, 2022. As per the company’s quarterly report, cash paid for interest on debt increased to $932 million in the first nine months of 2022 from $731 million in the comparable period of 2021.
Amazon and other tech companies faced persistent macro challenges last year. The company’s retail business was severely impacted in 2022 by a slowdown in consumer spending due to high inflation and fears of a potential recession. The company’s Amazon Web Services (AWS) cloud computing business slowed down but was resilient compared to the e-commerce business in the first nine months of 2022. Amazon is reducing its workforce, streamlining operations, and exiting unprofitable businesses to bring down its costs amid challenging business conditions.
Is Amazon Stock a Good Buy?
Despite the ongoing economic pressures, Wall Street remains bullish about Amazon stock. The Strong Buy consensus rating for Amazon is based on 35 Buys and three Holds. The average AMZN stock price target of $139.74 implies 62.8% upside potential. The stock fell 51% in 2022.
