Amazon opted to borrow funds for purchase of Whole Foods

Amazon.com is the latest big name to dive into the corporate bond pool this year, joining AT&T, Tesla, Microsoft, Duke Energy, Aetna, UBS, Verizon and others.

The online retail giant — whose chairman Jeffrey P. Bezos owns The Washington Post — sold $16 billion recently to finance its acquisition of Whole Foods Market.

Amazon preferred to borrow money at low interest rates over as long as 40 years instead of tapping its $21 billion cash hoard.

So why did Amazon borrow when it could pay for the purchase with stock, or cash or with its $10 billion in annual cash flow?

“It makes sense,” said Rajeev Sharma, director of fixed income at Foresters Financial. “Amazon is taking advantage of the fact that their debt profile is really manageable. They have a little over $8 billion, which is nothing for a company this size.

“Investors have been craving a name like this,” Sharma said. “A high-quality name. It seems at the long end (30 years-plus) of the bond market, utilities are extremely rich. Energy is volatile. You have this opportunity to buy a high-quality name, and investors have been kind of starved for that.”

And Amazon.com most surely doesn’t want to use cash because having a “battleship balance sheet” of $21 billion makes shareholders breathe easier and gives the company flexibility to make future acquisitions or endure downturns.

“Amazon doesn’t want to issue stock to make the purchase because that would introduce dilution,” said David Kass, finance professor at the University of Maryland. Besides, he added, “now is a sweet spot for debt. Interest rates are likely to rise.”

The Amazon issuance will have very little effect, if any, on the average individual investor who might own bonds through mutual funds.

Some of us might end up owning a small piece through a bond index mutual fund or exchange-traded fund. Some people own several bond mutual funds, which they view as hedges against the day when stocks, as they inevitably do, shift into reverse.

Direct purchasers of the Amazon bonds,