As global events continue to affect how customers spend in 2023, Amazon has secured an $8 billion loan in anticipation of market turmoil.
The loan (opens in a new tab)operational since January 3, 2023, it was provided by a consortium including Singapore’s DBS Bank and Japan’s Mizuho Bank, and the company says it will be used to strengthen Amazon’s financial position and provide a buffer against a potential economic downturn.
The revelation is likely to come as a surprise to customers and peers alike, as Amazon has largely done well in recent times of economic uncertainty caused by the coronavirus pandemic, thanks to a surge in e-commerce.
Amazon borrows $8 billion
However, in recent years the company has come under increasing scrutiny over its business practices and e-commerce dominance, which may indicate that the loan could be a precaution against potential regulatory action. According to Slack, similar legal action has already taken place against Microsoft, which sells its Teams video conferencing platform too cheaply, driving rivals out of the market.
Despite its global dominance, it seems even Amazon is apprehensive about what the future holds. In an email to TechCrunch (opens in a new tab)a company spokesman said:
“Given the uncertain macroeconomic environment, we have used a variety of financing options over the past few months to support capital expenditures, debt repayments, acquisitions and working capital needs.”
The loan, with a repayment period of 364 days, received mixed reactions. Some praised Amazon for its proactive approach to potential economic challenges, while others voiced concerns about the company’s debt addiction.
The 0.75% interest rate would be increased to 1.05% if the company decided to extend the loan for another 364 days, adding an estimated $932 million in debt interest expenses recorded in the first nine months of 2022.
Despite speculated cuts that could put 10,000 jobs at risk and cuts to many services, Amazon’s market capitalization is estimated to have fallen to around $875 billion after a record high of $1.88 trillion in July 2021.