From the Financial Times:
"Amazon locked in some of the lowest borrowing costs ever secured in the US corporate bond market on Monday, underscoring the rise of the ecommerce giant during the coronavirus pandemic and the boost the Federal Reserve has provided through its historic interventions.
"The company raised $10bn in an offering that included three-year notes carrying an interest rate of just 0.4 per cent, according to people briefed on the matter. The interest on the new three-year note was less than two-tenths of a percentage point above the rate investors charged the US government when it issued debt of a similar maturity in May - a stunning turn for a company whose debt was considered junk as recently as 2009.
"Amazon paid 1.9 per cent on a three-year note when it last tapped bond markets in 2017, to fund its takeover of the grocer Whole Foods Market. The rate it secured on Monday was below the previous record low of 0.45 per cent secured in 2012 and 2013 by companies including Apple, IBM and Walt Disney."
- KC's View:
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To be honest, this subject is way above my pay grade - I know almost nothing about the corporate bond market.
Actually, that's an overstatement. I know absolutely nothing about the corporate bond market.
But this story reminded me of something that Scott Moses, Managing Director and Head of Food Retail & Restaurants Investment Banking at PJ Solomon, talks about all the time - how Amazon's access to cheaper money than almost any other company (or country, for that matter) gives it an enormous structural advantage over almost every other retailer. It isn't an insurmountable challenge, but it does require everyone else to figure out what kinds of alliances, initiatives and guerrilla tactics might serve them best.
It ain't a fair fight … which only means that you can't fight fair. (The lesson, by the way, that we garnered from Pirates of the Caribbean in our book "The BIG Picture: Essential Business lessons from the Movies.")
