Business Context and Reporting Period
Company: Amazon.com, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 22, 2017
Context: The filing reports the issuance of multiple series of senior unsecured notes and the termination of a previously announced bridge loan facility. The primary purpose of the capital raise is to fund the consideration for the acquisition of Whole Foods Market, Inc., repay existing 2017 notes, and support general corporate purposes.
Key Financial Metrics and Debt Obligations
The filing details the creation of a direct financial obligation totaling $16 billion in aggregate principal amount through the issuance of seven series of notes. The filing does not provide specific revenue, profit, cash flow, or margin data for the reporting period.
| Note Series | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 2020 Notes | $1.0 billion | 1.900% | August 21, 2020 |
| 2023 Notes | $1.0 billion | 2.400% | February 22, 2023 |
| 2024 Notes | $2.0 billion | 2.800% | August 22, 2024 |
| 2027 Notes | $3.5 billion | 3.150% | August 22, 2027 |
| 2037 Notes | $2.75 billion | 3.875% | August 22, 2037 |
| 2047 Notes | $3.5 billion | 4.050% | August 22, 2047 |
| 2057 Notes | $2.25 billion | 4.250% | August 22, 2057 |
Material Changes Versus Prior Period
- Termination of Bridge Commitment: A $13.7 billion senior unsecured bridge term loan facility, previously committed by Goldman Sachs, Merrill Lynch, and Bank of America on June 15, 2017, was reduced to $0 and terminated in its entirety on August 22, 2017. This termination occurred because the Company received net cash proceeds from the issuance of the Notes described above.
- Debt Structure Shift: The Company replaced the short-term bridge financing with long-term fixed-rate debt obligations ranging from 3 to 40 years.
Guidance, Risks, and Unusual Items
Use of Proceeds: Net proceeds are designated for the Whole Foods Market merger consideration, repayment of 1.200% notes due in 2017, and general corporate purposes.
Special Mandatory Redemption Risk: If the Whole Foods Market merger does not close by February 15, 2018 (subject to a one-time 90-day extension) or if the Merger Agreement is terminated earlier, the Company is required to redeem the 2020, 2023, 2024, and 2027 Notes at 101% of principal plus accrued interest. The 2037, 2047, and 2057 Notes are not subject to this mandatory redemption.
Registration Rights and Interest Rate Penalty: The Company must file an exchange offer registration statement by August 22, 2018. If the exchange offer is not completed within 365 days or if a required shelf registration statement is not effective, the annual interest rate on the Notes may increase by up to 1.00% per annum.
Redemption Options: The Company may redeem notes at any time at 100% of principal plus accrued interest and a make-whole premium. Specific notes may be redeemed at 100% of principal plus accrued interest (without make-whole) starting one to six months prior to their respective maturity dates.
Investor Verification Checklist
- Verify the closing status and timeline of the Whole Foods Market merger to assess the risk of the Special Mandatory Redemption.
- Confirm the repayment schedule and status of the existing 1.200% notes due 2017.
- Review the Registration Rights Agreement (Exhibit 4.10) to monitor compliance with the August 22, 2018, exchange offer filing deadline.
- Assess the impact of the new debt service obligations on the Company's future cash flow and liquidity.
