Amazon.com Inc. has blown the primary market for new debt wide open just days after market volatility, sparked by soaring-then-plummeting oil prices, all but halted issuance. Its mega offering is priced cheaply, for a reason: Too much of a good thing is still too much.
At a total size of $37 billion spread across 11 tranches, the dollar portion ranks as the fourth-largest fundraising ever. But with an additional €10 billion ($11.6 billion) planned in eight euro-denominated bonds, it could top $50 billion combined and break the record set by Verizon Communications Inc. in 2013 when it raised $49 billion.
It’s the online retail and web services behemoth's turn to demonstrate the scale of its data center and artificial intelligence plans, a month after Alphabet Inc. embarked on a similar drive-by debt raid raising $32 billion. While the capital markets may seem to have capacity to absorb such monster deals, appetite will soon reach a natural limit as investors worry about being overexposed to a single sector if AI fails to deliver on its revenue promises.
With a market capitalization of $2.3 trillion and expected revenue this year of $800 billion, Amazon's $125 billion of outstanding debt is still relatively tiny. This week’s offering shows it can borrow at will in any maturity or currency of its choosing. It issued $15 billion of debt as recently as November — but the funding needs of AI are proving insatiable.
Raising a quarter of Amazon’s planned $200 billion of annual infrastructure expenditure in highly volatile markets is quite something. The dollar bonds are spread across maturities ranging from two years to a rare ultra-long 50-year deal; the euro securities range from two to 38 years. And Amazon is paying a premium to the average for investment grade corporates, as the chart below shows.
