Netflix to borrow another $2B to pay its programming bills

Lawrence Kim
October 23, 2018

The streaming darling, known for producing hits like "Stranger Things" and "13 Reasons Why", will raise the $2 billion in a bond offering that can go toward keeping up its content library.

Netflix said in April it planned to raise $1.5 billion in debt, after raising $1.6 billion in October previous year, bringing the total to about $5 billion.

The U.S. portion of the 10.5-year bond may yield around 6.375 per cent, while the euro notes could pay 4.625 per cent, according to people with knowledge of the matter.

Netflix's market value has soared nearly 70% this year to about $140-billion. "It's low-priced funding for them, especially relative to the cost of issuing new equity".

The company has consistently said that it expects to fund content acquisition through the high-yield bond market and is expected to spend around $9 billion on content this year, based on blockbuster third-quarter results announced last week.

In a press release, the streaming giant said the latest $2 billion funding will be used for "general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions".

Netflix continues to burn cash - and, as it has repeatedly told investors, that will continue for at least another year. Last week, S&P Global Ratings upgraded the company's credit by one level to BB- and raised its outlook to stable from positive.

Netflix shares fell more than 3% in early trading Monday after the announcement of the plans to issue $2 billion in new debt. Demand for the debt has been spurred by the worst supply shortage since 2008, according to JPMorgan analysts, and the higher demand kept a lid on relative borrowing costs even as the Federal Reserve hikes interest rates.

Other reports by Click Lancashire

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