Updated: Netflix Prices $1.5 Billion in Debt to Fund Content, Other Initiatives

House of Cards emmy nominations

[UPDATED, 5 p.m. PT] Netflix is raising $1.5 billion in additional long-term debt — up from its original $1 billion target, announced earlier Monday — the proceeds from which the company said it plans to use for content acquisitions and other general purposes, including potential acquisitions.

The company late Monday announced the pricing of an offering of $700 million aggregate principal amount of 5.50% senior notes due 2022 and $800 million aggregate principal amount of 5.875% senior notes due 2025.

Netflix said the sale of the debt is expected to close Feb. 5, 2015, subject to usual closing conditions.

In reporting earnings last month, Netflix CEO Reed Hastings and CFO David Wells told investors the company was planning to raise at least a billion dollars of debt, given the company’s step-up in content investment as well as the “current favorable interest-rate environment.”

“Over the next few years we expect to continue financing our original content expansion with long-term debt,” Hastings and Wells wrote in the letter. “As long as the maturities are spread out, and the interest cost is built into our content budgets, we think long-term debt is the best way for Netflix to finance the production of content.”

Earlier, after Netflix’s announcement plans to issue $1 billion in debt, both Moody’s and Standard & Poor’s downgraded their credit ratings on the company, meaning the company’s addition of debt carries more risk. (Moody’s cut its rating from “Ba3” to “B1,” and S&P dropped Netflix from “BB-minus” to “B-plus.”) “The downgrade and negative outlook reflects our expectation that Netflix will incur significant discretionary cash-flow deficits over the next several years and that debt leverage will be high during that time,” S&P said Monday.

Hastings and Wells, in their letter to shareholders, said in the first quarter of 2015 that Netflix will increase the amount of cash used for original projects launching in the period. Upcoming series include the third season of “House of Cards,” slated to launch Feb. 27. All told, the company this year expects to launch 320 hours of new and returning original series, as well as films, documentaries and stand-up comedy specials, which is three times the amount of original programming Netflix released in 2014, they said.

As of the end of 2014, Netflix reported $900 million in long-term debt on its balance sheet. The company issued $400 million in 10-year notes last year, after raising $500 million in 2013.

Filed Under:

Want to read more articles like this one? SUBSCRIBE TO VARIETY TODAY.
Post A Comment 3

Leave a Reply

3 Comments

Comments are moderated. They may be edited for clarity and reprinting in whole or in part in Variety publications.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

  1. skate_08 says:

    Is “issuing debt” the new fancy way of saying you’re taking out a loan?

  2. Good Vibes. says:

    Netflix was like the best 10 years ago but now I don’t know. Although, I’m still using my subscription to Netflix with my VPN provider IronSocket. I use them to unblock the site. I hope that, they will change…

More Digital News from Variety

Loading