As global events continue to affect the way customers spend their money in 2023, Amazon has secured an $8 billion loan in anticipation of market headwinds.
The loan, active from 3 January 2023, has been provided by a consortium including Singaporean DBS Bank and Japanese Mizuho Bank, with the company saying it will be used to strengthen Amazon's financial position and provide a buffer against any potential economic downturn.
The revelation will likely come as a surprise to customers and peers alike, as Amazon has largely performed well during the recent times of economic uncertainty caused by the coronavirus pandemic, thanks to a surge in ecommerce.
Amazon borrows $8 billion
However, the company has faced increasing scrutiny in recent years over its business practices and dominance in the ecommerce market, which could be an indication that the loan may be a precautionary measure in case of potential regulatory action. Similar legal action has already taken place against Microsoft, which sells its Teams video conferencing platform too cheaply, pricing rivals out of the market, according to Slack.
Despite its global dominance, it appears that even Amazon is apprehensive about what the future holds. In an email to TechCrunch, a company spokesperson said:
“Given the uncertain macroeconomic environment, over the last few months we have used different financing options to support capital expenditures, debt repayments, acquisitions and working capital needs.”
The loan, which has a 364-day term, has been met with mixed reactions. Some have praised Amazon for taking a proactive approach to potential economic challenges, while others have raised concerns about the company's reliance on debt.
The interest rate of 0.75% would be increased to 1.05% should the company decide to extend its loan by a further 364 days, further adding to its estimated $932 million spend on debt interest noted in the first nine months of 2022.
Despite speculated cutbacks that could see 10,000 jobs at risk and cutbacks to many services, Amazon’s market cap is estimated to have dropped to around $875 billion following a high of $1.88 trillion in July 2021.
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