TechCrunch: Amazon Secures an $8 Billion Loan in Anticipation of Market Volatility

Jan 05, 2023

(Image Source: The Washington Post)

With global events continuing to affect customer spending in 2023, Amazon has secured an $8 billion loan to prepare for market turbulence in the months ahead.

According to a recent statement, the loan – which was given by DBS Bank, Mizuho Bank and other financial institutions – will be used for "general company activities." It will mature in 364 days (January 3, 2024), with the possibility of extending it for another 364 days. An Amazon representative also told TechCrunch that the loan is just another funding option the company has used to protect itself against the "unsettled macroeconomic conditions."

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“Like all companies we regularly evaluate our operating plan and make financing decisions — like entering into term loan agreements or issuing bonds — accordingly,” the spokesperson said via email. “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.”

During the heightened months of the global pandemic, the tech firm doubled the scale of its fulfillment network, an investment that initially paid off but ultimately appeared to be flawed. Due to the slower-than-anticipated growth of e-commerce sales last year, Amazon was forced to cancel or postpone plans for over a dozen locations. The company's transportation expenses rose 10% to $19.9 billion in Q3 2022 as a result of the rising energy prices, which had a significant negative impact on Amazon's operations.

In an attempt to minimize expenses, Amazon intends to lay off up to 10,000 workers in the first quarter of 2023. Other cost-cutting steps taken by Amazon include halting corporate hiring in its retail sector, terminating its telemedicine service, closing all but one of its contact centers in the United States, and curtailing its lengthy delivery robot project, Amazon Scout. Despite these actions, the company's market valuation is on track to drop below $1 trillion.

After the end of the third quarter on September 30, Amazon had roughly $35 billion in cash and cash equivalents and nearly $59 billion in long-term debt. Amazon increased its cash payments of debt interest for the first 9 months of 2022 from $731 million to $932 million. The rate of interest margin on the additional $8 billion will begin at 0.75% before rising to 1.05% if Amazon chooses to prolong the loan's term.

Source: Amazon secures $8B loan, anticipating market headwinds

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