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

Monday to raise $ 2 trillion 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 last proposed debt is the sixth time 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 be gradually improved and the company will be able to-through revenue, EBITDA and margin growth."

The proposed $ 2 trillion netflix debt spreads for the second quarter of 2018, netting 7 million new streaming customers for the period (including 1.09 million in the U.S.).

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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 more cash flow – $ 3 trillion than to – $ 4 trillion, and that will be roughly flat with this year.

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

"We know we are making huge cash investments in content, and we want to ensure that we have the same high confidence in the underlying economics of our cash investments in the past," Netflix said in its Oct. 16 letter to shareholders. "These investments are going to be very profitable to help us keep growing our business."

According to Netflix, for the $ 2 trillion in new debt, the interest rate, redemption provisions, maturity date and other terms will be determined by negotiations between the company and the initial purchasers.