Amazon can borrow money more cheaply than Russia, Mexico and China

Jeff Bezos, founder and CEO
Jeff Bezos is thrilled at the bargain that Amazon just got on its $US16 billion bond offering. Kevork Djansezian/Getty Images

Amazon got a pretty sweet deal on its recent $US16 billion debt financing.

The deal was so good, in fact, that a chunk of it ended up being better than what the governments of Russia, Mexico, Greece, Chile and China could’ve gotten, according to a report from Quartz’s John Detrixhe.

The offering priced on Tuesday amid strong demand from investors, the Wall Street Journal reported. The company sold a $US3.5 billion tranche of 10-year bonds at a 0.9-percentage-point yield-premium to Treasurys, below guidance set by underwriters, according to the WSJ.

Given the 10-year Treasury is currently trading at around 2.27%, that makes for a yield on Amazon’s debt of around 3.2%. Detrixhe pointed out that while that’s still more expensive than what borrowing costs in Germany, the US and Canada, it puts some other world powers to shame.

Consider, for example, that the 10-year bond for Russia yields 7.8%, while their Mexican counterparts return roughly 6.8% and similar-maturity Chinese government securities yield 3.6%.

Amazon vs country bond yields v2
Amazon can borrow more cheaply than China, Mexico and Russia, among other major nations. Business Insider / Andy Kiersz, data from Bloomberg

Amazon is planning to use the $US16 billion it raised in the debt market to fund its recently announced $US13.7 billion acquisition of Whole Foods.

The tech giant isn’t the only high-flying company translating investor goodwill into favourable borrowing terms. Tesla, which has a junk rating and quickly burns through cash, easily priced a $US1.8 billion bond offering on Friday.

The deal ended up getting done at a record-low coupon for a bond of such maturity and low quality, according to a Bloomberg News report. What’s more, the originally sought $US1.5 billion was bumped up to $US1.8 billion because of outsize demand.

So if you’re an innovative, fast-growing corporate juggernaut, it looks like a good time to tap debt markets. And even if you don’t get the type of bargain enjoyed by Amazon, you’ll probably get a better deal than Russia.

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