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Netflix said to boost junk bond offering as investors pile in

Apr 24 2019 21:28
Molly Smith

Investors took heed of Netflix’s advice to get in on the company’s bond offerings while they can, allowing the company to increase the size of the sale to $2.24bn (about R32bn).

The streaming service originally planned to offer $2bn of debt and will now split the sale into $900m and $1.34bn of new bonds, according to people with knowledge of the transaction. It received orders of about $6bn between the two currencies, pushing the oversubscription rate to approximately three times, the people said.

The 10.5-year dollar securities may yield around 5.375%, while the euro notes are being sold at 3.875%, down from 5.5% and 4% respectively, according to the people, who asked not to be identified as the details are private.

In a call following first-quarter earnings last week, Chief Executive Officer Reed Hastings told debt investors that they “better get in soon” as the company looks to wind down its borrowing in the future.

Netflix has amassed $10bn of long-term debt to continually invest in content, development and production, which Wednesday’s offering will add to. Still, it expects to burn through $3.5bn of cash this year. Additionally, analysts surveyed by Bloomberg estimate that figure will stay negative through at least the first three months of next year.

The bond sale comes as Netflix’s forecast for new subscribers fell short of analysts’ estimates. It’s been raising prices in some of its largest territories, trying to shift toward profitability as competition mounts from other streaming services including Walt Disney Co., AT&T and Apple.

Morgan Stanley, Goldman Sachs Group, JPMorgan Chase, Deutsche Bank and Wells Fargo are managing the bond sale, the people said.

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