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Moody's raises rating on Amazon.com's $2.1 billion debt

By Monica Soto Ouchi
Seattle Times technology reporter

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Seattle-based Amazon.com yesterday saw its $2.1 billion in debt upgraded by a respected ratings service.

Moody's Investor Service raised its ratings on the online retailer's convertible notes to Caa1 from Caa2. The rating is three steps below investment grade and is considered junk-bond status.

Moody's also revised its outlook on the company to "positive" from "stable," citing its growing value in the retail industry.

"It's a signal that their financial picture continues to improve," said McAdams Wright Ragen analyst Dan Geiman. "I think that's about all you can read into it."

The online retailer lost $37.9 million, or 10 cents per share, on $3.3 billion in sales for the first nine months of the year. In the most recent quarter, it recorded its first profit outside the lucrative holiday period on a 33.3 percent jump in sales. The company ended the quarter with $1.06 billion in cash and marketable securities.

Wall Street has paid a great deal of attention to Amazon's debt, using it, at times, to question the company's long-term viability.

Amazon this year unloaded a portion of that debt. During the second quarter, it redeemed senior discount notes for $277 million. It also plans to redeem $200 million worth of convertible bonds later this month.

Meantime, the company has been reluctant to set a timeline toward sustained profitability because of fluctuations in the euro, the currency that underlies some of its long-term debt.

Amazon must remeasure that debt each quarter, and it incurs a gain or a loss depending upon the U.S. dollar's relative strength to the euro — which affects the bottom line. The company, for instance, recorded a $11.1 million noncash charge in the third-quarter for remeasurement of its debt.

The company paid $100.7 million in interest on its debt for the first nine months of the year.

Amazon's shares yesterday closed at $52.23 on the Nasdaq, up 25 cents. Its stock has risen 177.4 percent this year.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

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