With global events continuing to affect the way customers spend their money in 2023, Amazon took out an $8 billion loan in anticipation of market headwinds.
the lend (Opens in a new tab)active as of January 3, 2023, was provided by a consortium including Singapore’s DBS Bank and Japan’s Mizuho Bank, which the company said would be used to strengthen Amazon’s financial position and provide a buffer against a possible economic slowdown.
The revelation will likely come as a surprise to customers and peers alike, as Amazon has done considerably well during recent times of economic uncertainty caused by the coronavirus pandemic, thanks to the increase in e-commerce.
Amazon borrows $8 billion
However, the company has faced increasing scrutiny in recent years over its business practices and dominance in the e-commerce market, which could be an indication that the loan may be a precautionary measure in the event of potential regulatory action. Similar legal action has already been taken against Microsoft, which sells its Teams video conferencing platform so cheaply that it drives competitors out of the market, according to Slack.
Despite its global dominance, even Amazon seems to fear what the future holds. in an email to Techcrunch (Opens in a new tab)A company spokesperson said:
“Given the uncertain macroeconomic environment, over the past few months we have used various financing options to support capital expenditures, debt repayments, acquisitions and working capital needs.”
The loan, which has a term of 364 days, 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 will be increased by 0.75% to 1.05% if the company decides to extend its loan for another 364 days, adding to its estimated spending of $932 million on debt interest observed in the first nine months of 2022.
Despite expected cuts that could put 10,000 jobs at risk and cut many services, it is estimated that Amazon’s market value has fallen to around $875 billion after a rise of $1.88 trillion in July 2021.