×

Netflix Plans to Raise $2 Billion in New Debt to Fund Content Spending

Netflix is again going to debt markets to fund its enormous appetite for content, announcing plans Monday to raise $2 billion in financing through debt securities.

As of Sept. 30, 2018, Netflix reported $8.34 billion in long-term debt, up 71% from $4.89 billion a year prior. The latest proposed debt offering is the sixth time in less than four years that the company is raising $1 billion or more through bonds.

Netflix shares fell more than 3% in early trading Monday after the announcement of the plans to issue $2 billion in new debt. [UPDATE: The stock recovered a bit, closing down 0.9% for the day to $329.54 per share.]

On Monday, Moody’s Investors Service assigned a “Ba3” junk-bond rating to Netflix’s proposed offering, indicating a non-investment grade “speculative” security. The outlook for Netflix remains “stable,” according to Moody’s, which “reflects our expectation that Netflix’s operating results will improve gradually and the company will de-lever through revenue, EBITDA and margin growth.”

The proposed $2 billion debt offering comes less than a week after Netflix blew past expectations for subscriber growth for the third quarter of 2018, netting 7 million new streaming customers for the period (including 1.09 million in the U.S.).

Netflix continues to burn cash — and, as it has repeatedly told investors, that will continue for at least another year. Netflix’s free cash flow in Q3 was -$859 million (compared with -$465 million in the year-earlier quarter). For full year 2018, the company expects free cash flow will be closer to -$3 billion than to -$4 billion, and that negative free cash flow in 2019 will be roughly flat with this year.

In addition to its rising debt load, Netflix has billions in off-balance-sheet content-spending obligations mostly due within the next five years. As of Sept. 30, 2018, the company had $18.6 billion of obligations, which includes $10.2 billion due in one year or beyond.

“We recognize we are making huge cash investments in content, and we want to assure our investors that we have the same high confidence in the underlying economics as our cash investments in the past,” Netflix said in its Oct. 16 letter to shareholders. “These investments we see as very likely to help us to keep our revenue and operating profits growing for a very long time ahead.”

According to Netflix, for the $2 billion in new debt (the principal amount which may change), the interest rate, redemption provisions, maturity date and other terms will be determined by negotiations between the company and the initial purchasers.

More Digital

  • Illustration of the video streaming company

    Netflix Insists It Won't Move Into Selling Advertising

    Netflix wants you to know: It doesn’t have any plans now or in the future to start running commercials on its streaming service. Company execs have have regularly explained that being ad-free is a core part of Netflix’s attractiveness to consumers, and the strategy has been a standard part of its “Long-Term View” mission statement [...]

  • MODEL RELEASED Hand holding iPhone with

    Netflix to Launch Lower-Priced Mobile-Only Plan in India

    Following several months of testing, Netflix is getting ready to officially launch a mobile-only plan in India. Priced significantly below its regular subscription plans, the new plan is meant to help the company better compete with local players like Hotstar. Netflix announced the step in its Q2 2019 earnings letter to investors Wednesday, writing: “We [...]

  • Always Be My Maybe

    'The Perfect Date,' 'Always Be My Maybe' Draw Big Crowds on Netflix

    Rom-coms are working for Netflix: “The Perfect Date,” a romantic comedy starring Noah Centineo from the company’s hit movie “To All The Boys I’ve Loved Before,” has been viewed by 48 million subscriber households in its first four weeks on the service, Netflix revealed Wednesday. And “Always Be My Maybe,” starring Ali Wong and Randall [...]

  • Nintendo Switch

    Nintendo Releases Updated Switch With Better Battery

    Nintendo just refreshed its wildly successful Switch game console, but the company isn’t giving existing Switch owners many reasons to upgrade: The renewed game console comes with a better battery that guarantees up to 9 hours of game play, while otherwise sticking with the same design and features of the original Switch. The new model [...]

  • Ryan Chanantry - Topic SVOD

    First Look Media's Topic Plans to Launch Subscription VOD Service (EXCLUSIVE)

    Can Topic execute a solid pivot into premium video? The digital storytelling outlet of Pierre Omidyar’s First Look Media thinks it can put together a niche Netflix-style subscription-video service curated to appeal to young “culture cravers.” Topic plans to launch the subscription VOD service in the fourth quarter of 2019, stocked with hundreds of hours [...]

  • Dan Ahdoot

    This New Podcast Lets You Take a Peek Into Celebrities' Fridges (EXCLUSIVE)

    Comedian Dan Ahdoot wants to show you a side of celebrities you haven’t seen before — which is why he is having them open up their fridges. Anyone appearing on Ahdoot’s new podcast “Green Eggs & Dan,” which was launched by the podcast network Podglomerate Wednesday, has to bring along a photo of the inside [...]

More From Our Brands

Access exclusive content