Amazon has secured an $8 billion loan in anticipation of 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. In a statement, an Amazon spokesperson told TechCrunch that the loan adds to the range of financing options the company has tapped in recent months to hedge against the “uncertain macroeconomic environment.”
“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.”
Amazon’s income dipped toward the end of 2022 as the economy took its toll. The tech giant spent billions doubling the size of its fulfillment network during the pandemic, a play that served it well initially but which proved to be short sighted.
Amazon was forced to shut down or delay plans for over a dozen facilities as e-commerce sales last year grew slower than expected. 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. The layoffs, which would be the largest in the company’s history, are said to be concentrated in Amazon’s human resources, Alexa and retail divisions.
In other penny-saving measures, Amazon has frozen hiring for corporate roles in its retail business, shut down its Amazon Care telehealth service, closed all but one of its U.S. call centers, and scaled back Amazon Scout, its long-running delivery robot project. 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.
https://techcrunch.com/2023/01/03/amazon-secures-8b-loan-anticipating-market-headwinds/....
Here is a thought.
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.
The interest rate on amazon's $8 billion dollar business loan is 0.75%. I think currently US inflation is officially around 7%. What happens when interest rates on loans are significantly lower than inflation? Some might say loans become more profitable under these circumstances.
Example. Let's say crypto bob takes out a loan for $100 in 2022 on a 12 month plan. By the time 2023 arrives the $100 he borrowed could have lost 7% of value, due to inflation. Which means he might only have to payback $93 plus interest. If he was lucky enough to pay 0.75% interest as amazon is, he could in theory payback less than he borrowed. This is a rough example so please do not nitpick it. The basic principles could still apply even if every part of it isn't perfect.
Is there a good format for deploying a stablecoin or altcoin that improves on loan advantages gained by inflation being high? Coupled with interest rates being lower than inflation?
The chart for fiat in times of high inflation, could be similar to the chart for BAT and tokens which lack HODL incentive. I think there could be an angle or opportunity for those circumstances. But I can't seem to think of it atm.
