Netflix Junk Bond Offering Draws $6 Billion of Orders

(Bloomberg) -- Investors took heed of Netflix Inc.’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 $2.24 billion.

The streaming service originally planned to offer $2 billion of debt, but ended up splitting the sale into $900 million and 1.2 billion euros ($1.34 billion) of new bonds, according to people with knowledge of the transaction. It had received orders of about $6 billion between the two currencies earlier in the day, pushing the oversubscription rate to approximately three times, the people said.

The 10.5-year dollar securities will yield 5.375 percent, while the euro notes were sold at 3.875 percent, down from 5.5 percent and 4 percent 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 $10 billion 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 $3.5 billion 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 Inc. and Apple Inc.

Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. managed the bond sale, the people said.

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