Date
19 November 2018
Netflix aims to raise US$2 billion in new debt to help finance original TV shows and movie content acquisition. Photo: Reuters
Netflix aims to raise US$2 billion in new debt to help finance original TV shows and movie content acquisition. Photo: Reuters

Netflix plans another big bond sale to fund content spending

Netflix unveiled plans for a US$2 billion bond offering to fund its business growth as the streaming-video giant continues to invest heavily on original TV shows and movies amid intensifying competition.

The move, which will mark the second time this year that the firm will be taping the debt markets, is aimed at funding a broad spread of activities including paying for new content, the company said on Monday, Reuters reports.

Netflix has said it plans to spend US$8 billion on content this year. The company had already spent US$6.9 billion on TV shows and movies by the end of its third quarter.

If the activity apace, the 2018 spending is likely to be closer to US$9 billion.

In April, Netflix sold US$1.6 billion in debt, after raising US$1.9 billion in November 2017, bringing its total debt to US$8.4 billion, the majority of which has been raised in the past three years.

The company’s long-term debt as a percentage of total capital has roughly doubled to 65 percent since the end of 2014, according to the report.

Bumper quarterly results last week, driven by gains in international subscribers, eased concerns that the firm is running out of space to expand in developed markets where it can target a mass audience at profitable prices.

While Netflix has huge potential in emerging markets like India, some brokerages have begun to draw attention to the overall high cost it is paying as an enterprise to gain more users.

“This is further proof of Netflix’s need for capital to fund short-term operations and content capex,” Reuters quoted Richard Miller, founder and managing partner at Gullane Capital, as saying.

“It shows they are further than ever from being free cash flow positive,” Miller said.

Bearish bets against Netflix’s existing US$8.4 billion of junk-rated bonds have more than tripled this year to an all-time high of US$347 million, Reuters reported last week.

The new debt will be in the form of senior notes denominated in dollars and euros — securities which the company must repay before any unsecured debt in the event of a bankruptcy.

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CG/RC

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