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Moody's lowers outlook on Amazon to negative

Moody's Investors Service cut its outlook on Amazon.com from "stable" to "negative" on Monday, prompted by the online retailer's announcement that it was issuing new debt.

The credit rating agency also affirmed the company's Baa1 senior unsecured rating.

Following the news, Amazon stock dropped more than 3 percent.

An Amazon.com Inc. employee lifts a box from a conveyor at the company's fulfillment center in Tracy, California
David Paul Morris | Bloomberg | Getty Images
An Amazon.com Inc. employee lifts a box from a conveyor at the company's fulfillment center in Tracy, California

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The size of Amazon's new senior unsecured notes is yet to be determined, said Moody's Vice President Charlie O'Shea in a release. It is the agency's expectation that the funds will be used for corporate purposes that will support growth initiatives, rather than for shareholder returns.

"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 said.

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"While the new debt will further exacerbate Amazon's already weak interest coverage due to, among other things, the lack of visibility surrounding the cadence for deployment of proceeds, potential areas of future growth and investment utilizing these proceeds, and the timing of potential positive returns, Moody's believes that the company's excellent liquidity provides sufficient cushion to affirm the Baa1 rating."