The Cyber Monday Deal No One Was Looking For

On Cyber Monday, Amazon.com shoppers found deals on laptops, cameras, phones, ... and even Amazon's debt! Today, along with many online deals on consumer goods, Amazon also sold bonds to raise over $3 Billion for what what the company calls "general corporate purposes". Taking advantage of low interest rates, Amazon tapped into the bond market to build its cash reserves for the first time since May 1998, when the company was junk-rated.

The bonds were met with mixed reactions. S&P rated the bonds double-A-minus, a relatively strong rating just 2 notches below the US government's rating. The company is expected to generate strong revenues with its products such as the Kindle over the next few years. Moody's however, rated the debt at Baa1, 2 notches lower than S&P's rating.

Amidst the chaos of the start of the holiday shopping season, it seems most people were concerned with the hottest deals on electronics. According to a few investors, however, these bonds were the best deal around. It is unlikely Amazon is in dire need of the extra cash, but with interest rates being held down so low, it was just too good of an opportunity to pass up.


-Smit Purohit

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