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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Chi Pan who wrote (4009)	5/5/1998 8:41:00 PM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 164684

Amazon.com Is Hit In Bond Market; Deal Size Increased By Pallavi Gogoi NEW YORK (Dow Jones)--Amazon.com Inc. (AMZN) scored another hit Tuesday, this time with bondholders, as investors turned up in droves to get a piece of the online bookseller's offering. Demand was so strong, Amazon was able to fatten the deal to $325 million from an initially shopped $275 million. "There was broad interest from over 75 institutional investors for this deal," said William Kourakos, managing director at Morgan Stanley Dean Witter's global capital markets division. "It was three times oversubscribed," he added. Morgan Stanley Dean Witter was lead underwriter on the deal. Amazon.com's senior discount notes, due 2008 were priced at 61.507 for a 10% yield to maturity. The notes have a zero coupon for the first five years. "It is not a traditional credit in terms of the years of experience it carries but it is a fast-growing company,' said Christopher Towle, portfolio manager at Lord Abbett & Co., who bought a piece of the deal. Sources close to the deal confirmed that the Seattle-based company had a tough sell during the roadshow, especially because of the company's unconventional background. Underwriters Morgan Stanley acknowledged that investors had a lot of questions about Amazon and its cash flow, especially since the company hasn't yet posted a net income. "It was an issue for investors who were unfamiliar with the Amazon story," Kourakos of Morgan Stanley Dean Witter said. "But at the end of the day, the entire market was pretty satisfied and comfortable with the company.' After being freed to trade, the deal initially traded down but was buoyed up on demand and was being bid up 1/2 a point at 62 late Tuesday, market players said. Some observers said the deal exemplified the current craze in the junk bond market for the new wave of internet deals. One hedge fund portfolio manager with a short position in the company's stock pointed to the fact that rating agency Moody's Investors Service rated the notes a "highly speculative Caa2, yet investors were willing to lend this company money.' Comparing the yield to general market levels, he added: 'In fact the public is willing to pay a premium for the risk.' However, others pointed to the immense potential of the four-year-old company, which by the end of the first quarter this year had sold books to 2.3 million customers. That cumulative total is a 50% increase from last year. Janus Funds of Denver participated in the sale and picked up more bonds in the secondary market after Amazon was freed to trade. "What we particularly like about this company is that 58% of their orders are repeat customers," said Sandy Rufenacht, portfolio manager at Janus Funds. "If the future growth sticks to somewhere around that ballpark, we can be very comfortable.' Amazon's growth too has been at record pace. Its net sales increased to $87.4 million in the first quarter, a leap of over five times from $16 million a year earlier. "It has a market capitalization of around $2.19 billion and that's an awful lot of equity cushion," Towle noted. But he also said that the company's debt would not make up a major portion of his portfolio because of the various uncertainties surrounding it. There were also concerns about the company's lack of tangible assets. Rufenacht acknowledged: "Amazon doesn't have the assets that you can touch or feel.' But, he said: "The people are its assets and I'm confident in the management and they have a pretty compelling business plan.' -Pallavi Gogoi; 201 938 2122; Pallavi.Gogoi@cor.DowJones.com