>>Saturday, January 26, 2002
BLOOMBERG NEWS
NEW YORK -- Amazon.com Inc.'s credit rating was raised one level yesterday by Moody's Investors Service after the biggest Internet retailer announced its first-ever profit earlier this week.
Moody's raised the long-term ratings to "B3," the sixth-highest of 11 junk ratings, from "Caa1." Moody's also increased the ratings on Amazon's subordinated notes to "Caa2," the eighth-highest junk rating, from "Caa3." The outlook on the ratings is stable.
Amazon.com shares surged after the upgrade, at one point rising 99 cents -- about 7 percent -- before closing up 43 cents at $14.44.
The retailer has about $1 billion in cash on its balance sheet, which will be enough to meet its expenses, Moody's said. That means Amazon.com won't need to raise more money for the next two years, Moody's said.
"The upgraded ratings reflect improved operating measures" and lower cash drain, Moody's analyst Marie Menendez said in a statement. "Amazon.com has improved operating leverage and reduced the percentage of fixed-cost margin by increasing sales volume."
Amazon.com this week reported fourth-quarter net income of $5.09 million, or 1 cent a share, making money sooner than founder Jeff Bezos had predicted. Sales of $1.12 billion exceeded $1 billion for the first time.
The higher ratings could spell lower borrowing costs for Amazon.com when it next sells bonds. The company has about $2 billion in debt outstanding, including $264 million of senior notes maturing in 2008 and $1.2 billion of convertible bonds, which mature in 2009, according to Bloomberg data.
Amazon.com now has ratings akin to Domino's Pizza Inc. and Friendly Ice Cream Corp. The company is rated "B" by Standard & Poor's, the fifth-highest S&P rating, which is one rung higher than Moody's. |
