Netflix Unveils $ 2 Billion Debt to Fund New Content

(Reuters) – Netflix Inc (NFLX.O) announced Monday its third call on debt markets in a year, with the aim of collecting about $ 2 billion, the pioneer of video streaming investing heavily in original programming and in the acquisition of content to face increased competition.

Netflix bond prices have moved little in the immediate aftermath of the announcement, but can be expected to decline as the additional debt increases the company's credit risk. Shares of the company plunged 1% early in the session.

Netflix announced in April its intention to raise $ 1.5 billion in debt, following a $ 1.6 billion increase last October, for a total of about $ 5 billion.

The company has always stated that it planned to finance the acquisition of content via the high-yield bond market and that it is expected to spend about $ 9 billion in content this year, based on the outstanding third quarter results announced last week.

The new debt will be in the form of senior notes denominated in US dollars and euros – a type of debt that the company must repay in the event of bankruptcy.

The bearish bets on Netflix's $ 8.4 billion bad-rated bonds have more than tripled this year to an unprecedented $ 347 million, Reuters reported last week.

"The balance of short-term bonds reflects the idea that (bonds) will lose value if or if they issue more debt," said Samuel Pierson, an analyst at IHS Markit.

Netflix's total debt was $ 11.83 billion as at September 30th.

Netflix said Monday it intends to use the net proceeds of this offer for general purposes, which may include content acquisitions, production and development, potential acquisitions and strategic transactions.