The Daily Update: Amazon Debt Sale / Bloomberg Pret Index

Yesterday Amazon sold USD18.5bn of debt in 8 tranches to refinance its debt, buy back stock and to invest. The shortest tranche was a USD1bn 2-year that came at just 10 bp over treasuries, with the longest being a 40-year USD1.75bn bond issued at only 95 bp over. The USD18.5bn is Amazon’s biggest bond sale ever, they were originally going for USD15bn, and is second only this year to Verizon Communication Inc.’s USD25bn offering in March.

The sale comes about a week after Amazon’s latest quarterly earnings report, when it announced that it had $73 billion of cash and marketable securities on its books. It raises the question of why take on the extra $18.5 billion of debt in the first place. However, being able to borrow at historically low levels means that Amazon can leverage the cash to support growth investments which will be a long term positive for the company and its bottom line. At the same time as the company took on more debt, Moody’s also made the usual move of upgrading its credit rating by one notch to A1.

We also found a new function on Bloomberg that brought a smile to our faces yesterday, The Pret Index. The index records transaction volume at Pret’s across the UK. Bloomberg states, ‘If sandwich sales are any guide, London’s bankers, corporate lawyers and asset managers are taking their time returning to offices even as the pandemic eases across the U.K’ . As of this morning the City of London Pret’s are at 39% of the pre-Covid transaction level, with London Airports at just 19% and regional stations at 40%. This is opposed to London suburbs at 86% and regional towns at 81%.

Personally, I have very little sympathy for Pret’s demise. When I first started work in the city (many) years ago there was a privately owned sandwich shop on every street. The variety was enormous. Pret sent a large majority of these to the wall and replaced them with the same sandwiches in every shop, every shop looking and feeling the same, as well as charging you more for the pleasure.