Amazon.com, Inc. (AMZN) Message Board

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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 227.90

+0.4%

3:59 PM EST

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To: Deepak who wrote (3388)	4/24/1998 10:50:00 PM
From: Gary Korn	of 164684

A company that issues debt is also signalling to the market that it expects to have positive free cash flow (ie. be profitable) because the interest payments have to be paid on a regular basis. A company which expects to have losses for some time to come NEVER issues debt. Deepak, The new $275MM note may signal just the opposite: Interest payments on the new $275MM note do not begin until 5 years from now, in the year 2003. Arguably, AMZN does not expect to have positive free cash flow (i.e., be profitable) until 2003. I cannot tell from this new debt that AMZN expects to have any profits before then. In fact, the new $275MM note replaces an existing $75MM note which (unlike the new note) DOES require regular interest payments and which must be retired in 32 months from now. That may have the best AMZN could swing back in November/December, before the current internet mania. Perhaps AMZN secured the new $275MM note (discounted perhaps) because it expected no profits during the next 32 months and further because AMZN knew that it could not pay the $75MM note back in full within that timeframe. That would be a negative spin on the new financing. Gary Korn

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