Amazon’s Planned Bond Sale Prompts Negative Outlook From Moody’s

Amazon.com Inc. is planning its first bond sale in two years, prompting Moody’s Investors Service to reduce the online retailer’s outlook to negative.

The offer would increase Amazon’s debt to earnings before interest, taxes, depreciation and amortization and further weaken the company’s interest coverage, which stands at 1.2 times for the last 12 months ending September 2014, Moody’s analysts wrote in a statement today.

Moody’s affirmed its Baa1 senior unsecured rating for Seattle-based Amazon, three levels above junk, according to Moody’s.

“The change in outlook to negative results from Amazon’s announcement this morning that it was issuing a sizable, though amount to be determined, level of new senior unsecured notes,” Charlie O’Shea, a vice president at Moody’s, said in the statement.

The company plans to offer senior unsecured notes in four parts with proceeds to be used for general corporate purposes, according to a regulatory filing. Amazon last issued bonds in November 2012, according to data compiled by Bloomberg.

Amazon spokesmen Craig Berman and Ty Rogers didn’t immediately respond to e-mails seeking comment and a call to Amazon’s public relations department wasn’t immediately returned.

Quarterly Losses

Amazon in October posted its biggest quarterly net loss since at least 2003, Bloomberg data show. Shares of Amazon fell 2.5 percent to $330.1 at 1:07 p.m. in New York.

The company’s falling stock price underscores the lack of investor support for Chief Executive Officer Jeff Bezos’s emphasis of spending big and counting on sales growth over earning a profit. Bezos has poured money into smartphones, original television programming and drones, which have all pushed down earnings.

In an October conference call, Chief Financial Officer Thomas Szkutak said the company had “to be cautious” with its investments, but emphasized Amazon’s strategy of investing in growth.

In September, Amazon obtained a $2 billion credit line with Bank of America Corp. The two-year agreement could be extended for another three, Amazon said in a regulatory filing.

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