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S&P, Moody's affirm Amazon debt ratings ahead of Whole Foods buy

S&P Global Ratings said Aug. 11 that it affirmed its AA- long-term corporate credit rating on Amazon.com Inc. as the e-commerce giant prepared to issue debt to fund its $13.7 billion purchase of Whole Foods Market Inc.

The rating agency also assigned a AA- rating to Amazon's proposed offering of unsecured senior notes.

In addition, it removed the company's ratings from CreditWatch Negative, a designation the agency placed on Amazon's debt when the deal was announced as its analysts decided whether to downgrade the company. The ratings outlook is stable.

Despite the large amount of debt Amazon is taking on, analysts at S&P wrote in a note that they believe Amazon "will take a measured approach of incorporating the [Whole Foods] business into its evolving grocery strategy while working to ensure that [Whole Foods] remains competitive with its customer base."

That will involve development on multiple fronts, according to the analysts, who wrote that Amazon will have to add more technology and customer delivery options, and manage a growing web of logistics.

For the entire company, S&P said it expects growth rates "will be among the highest for the entire retail industry," according to the note.

Meanwhile, Moody's said it affirmed Amazon's Baa1 senior unsecured rating and also assigned a Baa1 rating to the company's proposed debt offering.

Moody's also changed its ratings outlook for the company to positive from stable, which the rating agency said "reflects the strength of Amazon's business model and the overall operating performance of the company." It expects Amazon's integration of Whole Foods to go smoothly and offer opportunities for leveraging, according to an Aug. 14 note.

Amazon's plans to buy Whole Foods have cast a shadow over the grocery industry since the companies announced the deal on June 16. Among the fallout has been an increase in some food retailers' odds of default, S&P Global Market Intelligence reported.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.