Fresh off reporting robust earnings last week, Netflix announced a $1.5 billion high-yield bond offering on Monday, a financing needed to to support its plans to spend as much as $8 billion on content this year.
Besides content, Netflix may use the net proceeds from the offering for production and development, capital expenditures, investments, working capital, and potential acquisitions and strategic transactions.
The deal is a single tranche of 10.5-year senior notes, and Netflix may have to price the bonds as high as 6%, say analysts. In Netflix’s last bond offering in October 2017, it offered $1.6 billion of 10.5-year notes at 4.875%.
S&P Global Ratings did not revise Netflix’s B-plus corporate debt rating and positive outlook, as the credit rater said the deal would not change the company’s “adjusted leverage.” As of March 31, Netflix had $6.5 billion of long-term debt, up from $3.2 billion at the end of 2017’s first quarter.
Netflix on April 16 reported that it had added more than 7 million subscribers in the first quarter. It also recorded net income of $290 million. Netflix executives projected $358 million in profit in the second quarter.
But the company is expected to continue to record negative free cash-flow (loosely, operating cash flow minus capital expenditures). S&P estimates the total deficit for 2018 could hit $3 billion.
As part of its $8 billion spending this year, Netflix plans to double its outlays for original content production in Europe, according to the Financial Times.
In the second quarter, Netflix expects international revenues, for the first time, to exceed those from the United States.