Amazon Is Seeking $16 Billion Bond Sale For Whole Foods (bloomberg.com) 46
An anonymous reader quotes a report from Bloomberg: Amazon is turning to the debt markets to fund the $13.7 billion acquisition of Whole Foods and power Jeff Bezos's planned conquest of the supermarket business. The world's largest online retailer is selling $16 billion of unsecured bonds in as many as seven parts, according to a person with knowledge of the matter. In a sign of market interest, the longest portion of the offering, a 40-year security may yield 1.45 percentage points above Treasuries, down from initial talk of 1.6 percentage points to 1.65 percentage points, said the person, who asked not to be identified as the deal is private. The sale marks the first bond-market foray since 2014 for Amazon and will support the purchase of the organic-food chain, according to a company statement. The partnership, which rattled the grocery world when announced in June, is expected to reduce prices at Whole Foods, an iconic yet struggling high-end grocery trying to lure more low- and middle-income shoppers. The deal could intensify a price war in an industry beset by razor-thin margins and persistent deflation.
Unsecured bonds (Score:3, Insightful)
AKA "free money from suckers"
Re:Well this is odd (Score:4, Insightful)
So why is Amazon going with this route?
Between this and Tesla's junk bond story not long ago, i'm thinking there are some junk bond shenanigans currently going on in the banking industry that makes things like this lucrative for the seller.
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16 billion is one big whack of cash. I doubt that a single bank would be willing or able to take on that kind of risk out of their own capital.
So, Amazon goes to the bond market, which is much larger than any bank, or even the entire US stock market (in fact it is twice the size of the stock market in capitalization.)
As for not issuing Amazon stock to the current Whole Foods stock-holders, perhaps they fear a dilution, or don't want to influence governance as a result of all those new voting shares. There i
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FWIW, most commercial debt is rotated on 5 year basis subjecting it to interest rate risk, but the bond terms are more varied (Amazon are issuing 3 year to 40 year bonds). Also, most banks really can't make a $16B loan (they don't generally have charter to take that kind of singleton risk). There are private equity groups that do amounts this large, but they generally want equity stake in exchange for loaning the money. On the the other hand, you can think of a bond offering as distributing the risk amon
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Do you think you can get a forty-year loan from a bank?
Call me crazy (Score:4, Interesting)
I've bought a lot of stuff from amazon.com. But, during the past few months, I've started thinking about whether I should intentionally start patronizing other businesses - both online and offline - when I want to shop for things I would normally buy from Amazon.
Thing is, it's hard to beat the convenience - and it seems like the companies which can more or less match that level of convenience are also humongous companies in their own right.
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NAPA, generally better parts, same price...all the parts stores dropped their margins (particularly their retail, burn, markup) a ton on when Amazon got into the parts business bigtime. Used to be a x2 factor vs jobber pricing, now it's about 20%.
Your issue with brake rotors isn't universal, likely just some models of Hondas. BTW you always want the big ones, replace the calipers too, if you have to. You should know where your Honda is from anyhow. Granting the new, American made, Hondas aren't as bad as
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Funny, they always ask me for engine size as part of the process. Must be a broken DB entry for Lexus IS series.
Getting the fat tires would be the main point... Master cylinder etc depends on the specifics of the Calipers. Bigger rotors don't necessarily require bigger caliper cylinders. You would certainly need new caliper brackets.
I once put Acura legend brakes on a Civic. Much cheaper than aftermarket.
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Nothing beats AutoZone and O'Reilly Auto Parts. Did the whole car-part purchasing from Amazon, ended in fail. Did you know that regardless of make/model, brake rotor size depends on if the car was manufactured in Japan or not? Yup, only the VIN will tell you that (or you measure the part directly), and Amazon doesn't have a way of filtering based on that either. At least locally, you can return the part that day and swap in time to finish the job.
This. There are specialty things that are best purchased directly from more "domain-specific" sites (from AutoZone to Buy Buy Baby or Etsy) as well as directly from Target or even Walmart. Books I usually buy them from Amazon out of convenience, but I do try to buy and pick up from Barnes & Noble.
I also buy a lot of seeds and plants for gardening off ebay or the local nurseries (even though the same things are typically available on Amazon.)
It is really hard to beat the convenience though.
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Hi,
I used to have Amazon Prime and order from there regularly. No complaints but I cancelled just for the f* of it. Why be tied to one retailer? Plus I don't believe Amazon is the cheapest nor the best. That would be BHPhotoVideo, if they have what I'm looking for.
My main stores, in order, are:
1- BHPhotoVideo
2- Walk-in stores: Target, Frys, Walmart
3- Amazon
4- Walmart.com
For not having prime, Amazon seems to "punish" me by adding extra shipping delays. But that only makes me appreciate the other stores,
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Says someone who shops at Fry's...
I recently realized it was too late to get something from Amazon, so I checked online to see if Frys had what I needed and would run down the street to pick it up. However, the dread of shopping there pushed me into the Apple Store (at a lower price) instead.
It is kind of a shame that they are stuck in the 80's with their mindset, but the store near me will be closing within a couple years.
Some of them might be nicer, but it is t what I would call an exceptional experience.
Re:Call me crazy (Score:4, Interesting)
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You might want to check your math before you throw any stones there buddy.
A better criticism would be to say that I can get 3% back on a store card without needing prime at all, so I'd actually have to spend $4950 a year to break even vs the non prime card. I almost spend that much with them, but not quite. What kicks in is the aforementioned no rush shipping bonus, which I more than make up the difference from. Plus there's the formal prime benefits, like the two day shipping for the occasions where I actu
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I've bought a lot of stuff from amazon.com. But, during the past few months, I've started thinking about whether I should intentionally start patronizing other businesses - both online and offline - when I want to shop for things I would normally buy from Amazon
At times I have wondered about this myself. But when I compare being able to click on a website for a product that magically shows up on my doorstep two days later as opposed to visiting the closest comparable meatspace stores 100 miles away to the south or 65 miles to the west down a twisty road across a 7000' mountain pass, I say "Naaaah."
So let me get this straight... (Score:3)
A 40-year bond from a private company which might not last even half that long with a yield that is 1.45% larger than historically low rate government bonds. Riiiight....
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A 40-year bond from a private company which might not last even half that long with a yield that is 1.45% larger than historically low rate government bonds. Riiiight....
The duration of a bond may not reflect its actual lifetime. If the bond is callable, then the issuer has the right to buy it back under conditions specified in the bond issue.
Many people have 30-year mortgages on their house, but refinance into other mortgages well before 30 years go by.
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The question is why would Amazon do something like that considering the rates would be really low? It would be in their best interest to delay payments for as long as possible.
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I'm not sure I understand your question. Amazon wants to borrow at a low rate. And if rates are going up, then locking them in is a good thing. If rates go even lower, then they can call the bonds back and re-issue new ones at lower rates. Granted, the bonds may rise in value if rates drop, but if the math works out for them, they can do it.
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No, what I said was that rates are expected to go up further in the future. So why would Amazon be interested in paying off their debt early?
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Okay, I think we understand each other now.
Obviously Amazon would hold onto its bonds if the yield Amazon has to pay out is low compared to the market (i.e., if rates rise.) But if rates drop, then Amazon may want to exercise the option (if they have it) to call the bonds back, and re-issue new ones that have a lower yield, i.e., a lower payout cost for Amazon. Just like someone refinancing a mortgage.
I don't know the details of the offering, but I doubt that all of the bonds Amazon wants to offer have 40-y
I can't grok the desc (Score:2)
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Doesn't Google have more cash on hand than god? (Score:2)
Why doesn't it use this? Did their lawyers and accountants screw up big time?
Unsecured bonds from a company as rich as Google, sounds like they are expecting epic fail and don't want to get caught.
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TFA is about Amazon, not Google.
Anyway, Amazon has about 21.5 billion USD in the bank -- or rather, banks, as not all of it is held domestically. So, this deal would consume most of its cash on hand if they didn't look for financing. It is not a good thing for a company to be low on cash in the bank, because their cash flow can be wrecked if they can't buffer unexpected expenses.
Re: Doesn't Google have more cash on hand than god (Score:2)
Oops. I meant Amazon.