Multinational e-commerce giant Amazon.com Inc has reportedly secured an 8 billion dollar loan from a group of lenders. News reports state that the eCommerce company has come to an agreement with certain lenders.
The lenders will provide 8 billion dollars as an unsecured loan to Amazon, which will be utilized for general corporate purposes. The unsecured loan will have a maturity period of 364 days which can be extended for another 364 days.
A spokesperson of Amazon told Reuters news agency in a statement that the company has been using different financing options to support capital expenditures, debt repayments, acquisitions, and working capital needs.
The statement also said that the company was taking this step in order to sail through macroeconomic volatility. Toronto Dominion was the administrative agent for the loan agreement in which DBS Bank and Mizuho Bank were among the lenders, Amazon said.
Amazon.com Inc which made huge gains in 2021 suffered a huge financial crisis in 2022 as sales and revenue from operations dropped beyond imagination. High inflation in the economies forced consumers to reallocate the flow of cash to essential items. As consumers began spending less on e-commerce platforms, sales through Amazon dropped.
Decreasing revenue from departments other than sales also put pressure on the financials of the company. The company also witnessed a steep decrease in advertising revenue as the financial crisis rigged by inflation forced corporations to cut down spending.
As revenue went down, Amazon decided to cut the workforce. The company decided to cut 10000 jobs as part of cost-cutting efforts. It even closed some of the smaller businesses and departments which were not performing as expected.
This phenomenon also impacted the stock market performance of the company as Amazon stocks tumbled by more than 50 percent in the last 12 months. Amazon is one of the largest tech companies in the United States to lose billions of dollars in market valuation in 2022.
With Amazon’s latest decision to take a loan for capital requirements, it is to be assumed that the e-commerce giant is planning to fight through the current economic crisis using debt and other similar financing tools. As central banks across the world are hiking interest rates for borrowing money, the cost of these loans will be higher than normal.
Various economists and financial institutions have already wanted a global economic recession in 2023. A recession at this point in time will mean that sales and revenue will suffer more diminution.
