Netflix Inc. is tapping junk-bond buyers again to help it fund its next wave of shows.
The world’s largest online television network is selling $1.5 billion of senior bonds, according to a statement Monday. The 10.5 year notes are expected to price later today, according to a person with knowledge of the matter, who asked not to be identified as the details are private.
Netflix’s sale plan follows a quarter in which it added 7.41 million subscribers, its strongest start to a year since going public 16 years ago. Moody’s Investors Service upgraded the company earlier this month citing expectations that the growth will continue and eventually turn its cash flows positive. The upgrade may give Netflix the support to sell $2 billion of bonds to boost liquidity and pay for rising programming costs, Bloomberg Intelligence analyst Stephen Flynn said in an April 13 report.
The proceeds of the offering will be used for general corporate purposes, which may include content acquisitions, production and development as well as potential acquisitions, the Los Gatos, California-based company said in its statement. In this case, once sold, the bonds can’t ever be bought back by Netflix. Typically such a non-call period is limited to a specific number of years.
With a stock market value of $142 billion and the best-performing stock in the S&P 500 this year, Netflix has often touted its “thick” equity cushion as reason to support its debt. It’s historically borrowed to invest in original content and plans to continue to do so, according to a statement to shareholders last week. Debt financing has a lower cost of capital than equity, it said. Netflix had $6.5 billion of long-term debt as of March 31.
Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. are managing the sale, the person familiar said. — Bloomberg