A laptop computer screen displaying the Netflix homepage stands against an illuminated screen bearing the company logo in this arranged photograph in London, U.K. (Photographer: Chris Ratcliffe/BloombergDirect Download)

Netflix to Sell $2 Billion of Bonds in Return to Junk Market

(Bloomberg) -- Netflix Inc. is returning to the junk-bond market to fund its content expansion as the company comes under pressure from media giants including Walt Disney Co., AT&T Inc. and Apple Inc.

The streaming company is selling $2 billion of bonds in a two-part offering denominated in dollars and euros, according to a statement Tuesday. The proceeds will be used for general corporate purposes that may include investing in content, production and development, the statement said.

The notes will mature in 10.5 years and can’t be bought back, according to a person with knowledge of the matter. Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. are managing the bond sale, said the person, who asked not to be identified as the details are private. The bonds are expected to price Wednesday.

Netflix to Sell $2 Billion of Bonds in Return to Junk Market

Netflix is coming off a quarter in which its 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 when the competition among other streaming services is mounting.

What Bloomberg Intelligence Says

“Its planned $2 billion-equivalent sale of dollar and euro-denominated notes will enable Netflix to absorb losses and maintain adequate liquidity -- it recently increased its 2019 cash-burn forecast to about $3.5 billion.”
--Stephen Flynn, a credit analyst
Click here to view the research report

Los Gatos, California-based Netflix has traditionally borrowed semiannually following its first and third quarter results in April and October, respectively, amassing a $10 billion debt load in the process. But Chief Executive Officer Reed Hastings said the issuance may not last much longer as the company will soon be able to fund itself. It’s still expecting to burn through $3.5 billion of cash this year, but its financing needs will start to abate in 2020.

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