Netflix plans $2B debt issue to fund new programming

Cornelia Mascio
Ottobre 23, 2018

The streaming giant on Monday announced plans to raise $2 billion through a bond offering, which will be issued in dollars and euros and take the company's debt past $10 billion for the first time. The company's stock is worth seven times more than it was five years ago, to give Netflix a market value of about $146 billion. Netflix paid less than 6 percent when it last tapped the market in April, in part because underlying Treasury yields were lower.

Netflix shares fell more than 3% in early trading Monday after the announcement of the plans to issue $2 billion in new debt. "It's low-priced funding for them, especially relative to the cost of issuing new equity".

"To me it feels a bit like a win-win situation", said John McClain, a high-yield money manager at Diamond Hill Capital, which oversees $22.6 billion including Netflix debt.

Netflix has made no secret of its strategy to spend as much cash prioritizing original series and films. Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. are managing the sale, according to a person familiar with the matter who asked not to be named because the deal is private.

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.

According to Netflix, for the $2 billion in new debt (the principal amount which may change), the interest rate, redemption provisions, maturity date and other terms will be determined by negotiations between the company and the initial purchasers.

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