Avnet adds $1 billion of bank credit as inventory climbs $600 million and debt reaches $3.48 billion

Avnet▼−1.93% — Avnet, down 1.93 percent today, the Phoenix chip distributor that emerged this week as the quiet winner of the memory squeeze↗, just enlarged the credit line that pays for its shelves. On October 13 the company and its Dutch subsidiary Avnet Holding Europe BV signed Amendment No. 3 to their bank facility↗, lifting total commitments by $1.0 billion to $2.75 billion, with another $1.0 billion available on request ¹. Bank of America▲+0.80% — Bank of America, up 0.80 percent today stays administrative agent, and the amendment deletes the SOFR credit spread adjustment, a legacy surcharge on Avnet's borrowing rate ¹.

No filing says what the enlarged line will fund; the inventory reading that follows is an inference, drawn from debt rising at the same time as memory-priced stock.

A record quarter that lands as inventory

A distributor buys before it sells, and the buying is the story. June-quarter sales hit a record $8.3 billion, up 48% in a year, and about a third of that growth was memory price increases, chief financial officer Kenneth Jacobson said on the August earnings call↗ ²³. Inventory dollars rose $600 million, more than half of it pricing and substantially all of that memory ³.

The cash side ran the other way. The quarter consumed $291 million of operating cash, with more use expected in the September quarter ³. Over the same year, debt climbed to $3.48 billion from $2.88 billion while cash fell to $155 million ⁴.

The one AI credit line still growing

The amendment landed in the week AI debt went from expensive to distressed. CoreWeave▲+3.04% — CoreWeave, up 3.04 percent today, the AI data-center operator carrying more than $51 billion of debt and obligations, saw its unsecured bonds due 2032 trade below 80 cents on October 14 as the stock fell 15% ⁵⁶. The cost of insuring against its default passed 1,140 basis points↗, beyond the 1,000 level credit analysts read as distress, and Oracle▲+2.08% — Oracle, up 2.08 percent today, the software company borrowing for AI data centers, saw its insurance cost rise in step ⁶.

Upstream, the cash arrives first

Upstream, memory makers are paid before they ship. Micron▲+1.10% — Micron, up 1.10 percent today, the US memory maker, has signed about $100 billion of five-year take-or-pay contracts↗, where buyers pay whether or not they take delivery, and holds $22 billion of customer deposits while filling only half to two-thirds of AI customers' demand ⁷. Samsung and SK Hynix▼−1.73% — SK Hynix, down 1.73 percent today, the two largest memory makers, are down to fewer than ten days of finished memory ⁸, and makers have reportedly sold out 2027 capacity on multi-year terms↗ ⁹. The same week traders priced AI data-center debt as distressed, Avnet's banks enlarged its credit line.

The inventory has to sell through

Management's defense is public. Inventory days fell to 71, the lowest in nearly four years, return on working capital hit 19%, and executives said they see no clear evidence of double-ordering ²³. The caution is that the September-quarter guide of $9.0–9.3 billion implies the borrowing keeps compounding, on an interest line that ran $66 million last quarter, before the limit rose ³.

The December cash flow statement is the tell. Either the record revenue converts to cash, or it sits on shelves the banks paid for.