Netflix priced a junk-bond offering of $1.9 billion — the streamer’s biggest round of debt financing to date — as it looks to fuel its continued content binge-spending.
The $1.9 billion debt offering, announced Monday evening, was increased from Netflix’s plan announced earlier in the day to issue $1.5 billion in debt. Shares of Netflix had closed down 2.8% Monday, to $318.69 per share, as investors reacted to the company’s plan to take on additional debt.
Netflix has been routinely turning to debt for financing its massive content spending instead of raising that through equity markets, because “we believe the debt is lower cost of capital compared to equity,” as the company said in its April 16 letter to shareholders. The latest proposed debt offering is the fifth time in a little more than three years that Netflix is raising $1 billion or more through bonds.
As of March 31, Netflix had $6.54 billion in long-term debt and $17.9 billion in streaming content payment obligations (of which $3.44 billion are long-term content payment obligations). The company had $2.6 billion in cash and equivalents on hand as of the end of the first quarter of 2018.
Netflix’s interest expenses have risen as it assumes a bigger debt load. In Q1 2018, interest expense was $81.2 million, up 74% from $46.7 million in the year-earlier period. But as a percentage of operating income, its interest expense was the same — 18.2% — for both quarters.
Netflix said the latest debt offering of 5.875% senior notes, set to mature Nov. 15, 2028, is expected to close on April 26. The company will begin paying interest on the notes in cash semi-annually beginning Nov. 15, 2018.