Netflix Takes Out New Line of Credit for Up to $750 Million

Netflix Reed Hastings
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Netflix has whipped out the credit card to potentially spend another half-billion dollars — or more — on content and global expansion.

The company has entered into a revolving credit agreement to borrow $500 million, according to a regulatory filing Friday. In addition, Netflix has the option to increase the amount of the revolving credit facility by up to an additional $250 million, subject to certain terms and conditions.

Netflix said it will not immediately borrow any amount under the revolving credit facility. In the future, the company may use the cash for “working capital and general corporate purposes,” according to the filing. Netflix’s most cash-intensive activities are acquiring and producing content.

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The move is the latest by Netflix to fund its enormous appetite for programming. In its second-quarter 2017 letter to shareholders, Netflix said it will continue to use debt to finance its spending, including on original content, after closing a $1.4 billion offering (1.3 billion euros) in April. The company expects to have negative free cash flow “for many years,” execs said in the letter.

As of June 30, Netflix had $4.84 billion in long-term debt (versus $3.36 billion at the end of 2016). Streaming content obligations — payments related to the acquisition, licensing and production of streaming content over a multiyear period — swelled to $15.7 billion at the end of Q2, up from $13.2 billion in the second quarter of 2016. Cash and equivalents stood at $1.47 billion as of June 30, versus $1.92 billion at the end of 2016.

The lenders for Netflix’s new line of credit are Deutsche Bank, Goldman Sachs, JPMorgan Chase Bank, Morgan Stanley and Wells Fargo.

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  1. Adam says:

    With Netflix’s debt to cash already running at approx $5B to $2B respectively … earnings below $500M annually and company projected $2.5B annual negative cash flow; the company would be better off floating a 10-15% equity share secondary placement, given its high valued $80B market cap … and raising $8-12B cash to fund it content acquisition, production and worldwide expansion.

    Netflix should take advantage of their high valued stock currency while they have it and avoid indebting the company to fuel growth.

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