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FinanceAmazon

Amazon’s new debt plans raise a red flag at Moody’s

By
John Kell
John Kell
Contributing Writer and author of CIO Intelligence
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By
John Kell
John Kell
Contributing Writer and author of CIO Intelligence
Down Arrow Button Icon
December 1, 2014, 11:21 AM ET
Photograph by Daniel Acker — Bloomberg/Getty Images
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Amazon.com’s plans to raise some new debt led Moody’s Investors Service to lower its outlook on the e-commerce giant, citing a lack of visibility surrounding the use of those proceeds and the timing of potential positive returns.

The news comes after Amazon.com in a regulatory filing with the Securities and Exchange Commission it would issue new senior unsecured notes. The debt offering had scarce details: the size of the offering wasn’t disclosed, and Amazon (AMZN) only said it would use the proceeds for “general corporate purposes.”

Moody’s said there were questions about the timing of possible positive returns that could stem from the use of that debt, and the ratings firm said it doesn’t believe the funds will be used for “any form of shareholder returns.”

Amazon has faced some challenges of late, with recent quarterly results coming in below Wall Street’s expectations. Some have said the company is too focused on long-term investments (and the costly spending needed to support those initiatives) instead of its bottom line.

Moody’s ratings on Amazon’s currently stands at Baa1, which is just three notches above junk territory. Still, that rating is safely within the key investment-grade range, which reflects a low risk of default in the eyes of the ratings firm.

About the Author
By John KellContributing Writer and author of CIO Intelligence

John Kell is a contributing writer for Fortune and author of Fortune’s CIO Intelligence newsletter.

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