A1 for Amazon​

By Rachel Strickland​


The Story

On Monday, Amazon raised $18.5 billion of debt – the behemoth’s largest ever bond sale, and the second-largest this year after Verizon Communication Inc.’s $25 billion offering in March (Bloomberg; Financial Times).

In light of the perceived safety of Amazon as an investment, the company had a record low credit spread on their 20-year corporate bond - 0.5 percentage points more than the yield on a US treasury (supposedly risk-free) equivalent. Similarly, their two-year bond was just 0.1 percentage points higher and has been ringfenced for sustainability projects such as clean transport and renewable energy. Accordingly, credit rating agency Moody’s upgraded Amazon's credit rating to A1 – indicating to potential investors their investment-grade status and low chance of default on any repayments (Financial Times).

It was reported that the funds will be used for “general corporate purposes” including working capital and acquisitions (Bloomberg). Suggesting continued growth, Amazon announced this week the addition of 10,000 UK employees and 75,000 workers across the US and Canada, to add to their over one million strong global workforce (BBC News). To add to the company’s fortunes, last week, Amazon had a €250 million EU tax bill overturned in the European General Court (The Guardian).

What It Means For Businesses And Law Firms

With low credit spreads, increasing demand for US corporate debt, and the prospect of a rebounding US economy, large corporations may utilise the favourable borrowing environment to raise cheap capital while it lasts (Financial Times). Debt finance lawyers may see an uptick in work from both issuers and underwriters on standalone bond issues and debt programmes*.

As Amazon continues to face scrutiny over their working conditions and strikes among their vast global workforce (VICE), employment lawyers may advise on employment regulation in areas like health and safety, and working hours. For example, in March, the company negotiated a new deal for UK employees, which included a greater share in company profits and the provision of a confidential hotline to report unacceptable working conditions. Additionally, following the continued scrutiny over Amazon’s tax bill, tax lawyers will likely continue to advise on multijurisdictional compliance to avoid similar litigation, and monitor the increasing pressure for global action on big tech.

* Debt programmes are effectively primary documentation containing standardised terms and conditions that can be used by a borrower to undertake a number of bond issues at their discretion.

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