Amazon secures $8B loan, anticipating market headwinds

Amazon secures $8B loan, anticipating market headwinds

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Amazon has obtained an $8 billion loan to meet market headwinds.

Provided by DBS Bank, Mizuho Bank and others, the loan — which will mature in 364 days (January 3, 2024), with an option to extend for another 364 days — will be used for “general corporate purposes,” Amazon said in a filing with the U.S. Securities and Exchange Commission. A spokesperson for Amazon stated that the loan is an addition to the variety of financing options the company has used in recent months to protect against the “uncertain macroeconomic climate “.

“Like other companies, we regularly evaluate and make financing decisions — such as entering into term loans agreements or issuing bond — accordingly.” The spokesperson stated via email. “Given the uncertain macroeconomic climate, we have used various financing options over the past few months to support capital expenditures as well as debt repayments and acquisitions .

Amazon’s income dipped toward the end of 2022 as the economy took its toll. The tech giant spent billions to double the size of its fulfillment network in the pandemic. This was a move that worked initially, but proved to be too costly.

Amazon had to shutdown or delay plans at over a dozen facilities because e-commerce sales grew slower than expected last year. Another headwind — soaring energy prices — impacted Amazon’s business in a major way, with the company’s spending on shipping climbing 10% to $19.9 billion in Q3 2022.

To cut costs, Amazon plans to reduce its workforce in early 2023, reportedly by as much as 10,000 employees. These layoffs would be the largest in Amazon’s history and will be concentrated in Amazon’s human resources, Alexa, and retail divisions.

Aside from freezing corporate roles in Amazon’s retail business, it also shut down its Amazon Care telehealth service and closed all but one U.S. call center. scaled back Amazon Scout (its long-running delivery robot program). Those moves haven’t been enough to prevent the company’s market cap from falling below $1 trillion for the first time since April 2020.

Amazon had about $35 billion in cash and cash equivalents and long-term debt of about $59 billion at the end of the third quarter ended September 30, Reuters reports. For the first nine months of 2022, Amazon paid $932 million in cash paid of interest on debt, up from $731 million for the same period a year earlier; the interest rate spread on the new $8 billion will start at 0. 75% before increasing to 1. 05% if Amazon decides to extend the loan’s maturity.

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