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Netflix Gets $100M Credit Line

22 Sep, 2009 By: Erik Gruenwedel

Netflix has received a $100 million revolving line of credit (including an additional commitment for $50 million) that the Los Gatos, Calif.-based online DVD rental pioneer said it would use for working capital and general corporate needs.

Under terms of the credit agreement with Wells Fargo Bank, Netflix’s pre-tax earnings (EBITDA) cannot fall below a range of $125 million to $200 million over a four-quarter financial period.

Netflix, which spent $1.1 million on technology and development costs in the most recent quarter (ended June 30), ended the period with $26.3 million in free cash, compared to nearly $100 million in free cash at the end of 2008, according to a regulatory filing.

Netflix executives in recent conference calls have alluded to the growing expense surrounding procuring content for its Watch Instantly streaming service, in addition to efforts by studios — notably Warner Home Video — to revisit revenue-sharing agreements, including higher license fees.

Indeed, CFO Barry McCarthy during an investor group meeting earlier this month in San Francisco appeared to attempt to assuage studio concerns when he said the rental service was the highest source of studio license revenue for subscription-based distribution.

Separately, Netflix CEO Reed Hastings told Reuters he was open to streaming movies on the Apple iPhone, a move he was willing to consider only after the Watch Instantly service was firmly ensconced within video game platforms and high-definition televisions.

“We will get to mobile eventually, including the iPhone,” Hastings said.

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