Netflix to Borrow Another $1 Billion With Record High Cash

(Bloomberg) -- Netflix Inc. is selling new junk bonds, even as the company sits on a record high cash balance and turned its first quarter of positive cash flow in six years.

The streaming giant is looking to borrow $1 billion between dollars and euros to fund content acquisitions and production, among other general corporate purposes, according to a statement Wednesday. The five-year dollar securities may yield around 3.75%, not far off that of a low investment-grade rated company, according to a person with knowledge of the matter. Levels on the euro portion will be released Thursday, the person said, though earlier whispers indicated a rate near 3.5%.

Netflix is coming off of its best quarter yet for subscriber growth, as people who are house-bound during the coronavirus pandemic spend more time watching streaming services, contributing to the success of hits like “Tiger King” and “Love Is Blind.”

The bond offering comes as Netflix’s stock and bonds have surged in recent weeks, as one of the rare companies to benefit from the global shutdown. With production largely on hold, Netflix generated positive free cash flow of $162 million, the first time it hasn’t been negative since 2014. It also has $5.2 billion of cash, a record high balance.

Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Wells Fargo & Co. are managing the bond sale, the person said, asking not to be identified as the details are private. It’s expected to price Thursday.

While Netflix has traditionally sold bonds after its first quarter earnings in April, it’s looking to reduce its need to tap public markets for additional funding by becoming sustainably profitable. Analysts said ahead of the company’s results that it didn’t need to raise more money, but could take advantage of cheap borrowing costs to boost liquidity even further.

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