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Netflix selling $2bn of junk bonds to fund new shows

Oct 22 2018 16:28
Misyrlena Egkolfopoulou and Claire Boston, Bloomberg

Netflix is once again turning to the junk-bond market to fund new programming as the streaming-video giant seeks to maintain its torrid subscriber growth.

The $2bn bond offering, which will be issued in dollars and euros, comes just a week after the company reported a bigger jump in subscribers than Wall Street analysts expected.

The bonds would push the cash-burning company’s debt load above $10bn for the first time. Netflix’s market value has soared almost 70% this year to about $140bn.

Netflix said in a statement that it will use proceeds from the offering to continue to acquire and fund new content.

The company said last week that it expects to burn about $3bn in cash this year as it continues to prioritise original series and movies.

Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co, Deutsche Bank and Wells Fargo & Co are managing the sale of the 10.5-year bonds, according to a person familiar with the matter.

Impressive subscriber growth and revenues have given Netflix leeway to continue to spend massive amounts of money to fund its programming. Last week, S&P Global Ratings upgraded the company’s credit by one level to BB- and raised its outlook to stable from positive. Moody’s Investors Service raised its rating in April, when the company last issued bonds.

The company’s announcement comes a few days after Uber raised billions of dollars of cash by tapping the high-yield bond market in a private placement. 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.

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