Moody's Lowers Outlook On Amazon To Negative, Affirms Debt At Baa1

The rating agency Moody's lowered its outlook on Amazon.com, Inc. (NASDAQ: AMZN) on Monday to Negative from Stable while affirming its senior unsecured rating at Baa1.

According to the rating agency, the change in outlook stemmed from the company's announcement that it will issue a "sizeable" but undetermined amount of new senior unsecured notes for general corporate purposes.

"The negative outlook reflects the impact the new debt will have on interest coverage that is already weak at 1.2 times for the LTM September 2014, as well as debt/EBITDA, which will increase meaningfully as well," Moody's stated. "Given present weak interest coverage due to expense levels that are likely inflated as a result of significant investments in both technology and SG&A, any potential upward rating movement in the near-to-medium term is unlikely."

The rating agency adds that Amazon's Baa1 rating reflects the company's "excellent" liquidity and conservative financial policy relative to shareholder returns. However, the rating agency recognizes that Amazon's "dominant position" as an e-commerce giant faces increased competition from brick and mortar retailers who are expanding their online businesses.