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Netflix Upping Debt to Fund Content Acquisitions

2 Feb, 2015 By: Erik Gruenwedel

Subscription service offering investors $1.5 billion in bonds

In a move that should leave content holders and creators rubbing their hands in anticipation, Netflix Feb. 2 announced it would be offering $1 billion in senior notes to qualified institutional buyers in compliance with regulatory rules. Later in the day Netflix upped the offering to $1.5 billion, which included $700 million of 5.50% senior notes due Feb. 15, 2022, and $800 million of 5.875% senior notes due Feb. 15, 2025.

Netflix said it would use the funds to secure content acquisitions and general expenses as it expands service globally.

The debt offering was presaged in the subscription streaming pioneer’s most recent investor letter, with CEO Reed Hastings and CFO David Wells indicating the time was right due to a favorable “interest-rate environment,” among other considerations.

“We will continue to grow the percentage of our content spending dedicated to originals for the next several years. This will mean more cash usage, which means more debt,” Hastings and Wells wrote Jan. 20.

Indeed, Netflix expects to release upwards of 20 original programs annually, expanding into 200 countries by 2017.

Netflix ended 2014 with $900 million in long-term debt and about $9.5 billion in streaming content obligations.

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