Breakingviews: Amazon creates bazaar for U.S. banking wannabes

Amazon.com has rounded up some unusual suspects. The e-commerce goliath recently added to its growing pile of debt with an $8 billion loan. The extra funding is curious, but not as much as the foreign banks providing it.

Slowing growth, weakening profitability and planned acquisitions, including 1Life Healthcare and iRobot, are reshaping Amazon’s balance sheet and creating new claims on its resources. It had nearly $60 billion in combined cash and easy-to-sell securities as of Sept. 30, but it also burned through some $20 billion of free cash in the 12 months ending in the third quarter. In that context, raising $8 billion, fast on the heels of arranging a $10 billion term loan in November, seems intuitive for boss Andy Jassy.

Less intuitive is the roster of financiers. After first tapping the market’s biggest bookrunners, Amazon enlisted Canada’s TD Securities to shop the lesser-traveled byways around Wall Street for the follow-up deal. Among those agreeing to lend to Amazon for 364 days at 0.75% over the benchmark rate, plus an additional 0.1% credit spread adjustment, were Australia’s ANZ, Bank of China, France’s Credit Agricole, Spain’s BBVA, Britain’s NatWest and Singapore’s DBS.

The six banks were named participants on a grand total of 167 U.S. corporate loan issues last year worth just $36 billion, according to Refinitiv data, compared to some 3,650 by Bank of America, JPMorgan and Wells Fargo for a combined $1 trillion. Also joining the most recent Amazon consortium was Japanese mid-tier competitor Mizuho Financial.

It’s easy to understand why the wannabes would jump at the chance to work with Amazon. Although its credit profile has slumped a bit – retained cash flow, an after-dividend measure used by ratings agency Moody’s Investors Service, has dipped below 50% of net debt – it is a brand-name borrower with an investment-grade rating. Some in the latest syndicate will have access to cheap funding. Others such as BBVA, which offloaded its American subsidiary but kept its broker-dealer business, are keen to expand in U.S. investment banking.

For Amazon, spreading the wealth is a chance to trial new banking relationships before potentially hiring them for more complicated matters. Or at least, that was a carrot that it probably dangled. In reality, it’s easier to claw into the online retail marketplace Amazon dominates than it is to crack the U.S. financial firmament.