According to the Rule 144A of the Securities Act of 1933, these bonds will be available to institutional buyer, however it will also be offered to investors outside the United States. Netflix later on Monday announced the terms of the bonds, according to which on $700 million aggregate principal amount of 5.50%, 8 years bonds maturing in 2022, and 800 million bond of 5.875% with maturity of 10 year will be due in 2025. The sale of these senior notes will probably get close on February 5th.
In order to stay up front, the streaming giant Netflix plans to invest huge amount in content acquisition as the competition continues between Google, Amazon, Facebook and others. According to analysts, they expect Netflix to invest more in its core programming as it remains relied on TV studios and TV programs for content.
The streaming video company said that they will use these funds for 'general corporate purposes', which includes capital expenditures, content acquisition, and other worthy acquisition opportunity that may arise.
Standard and Poor's reduced Netflix's credit rating to a 'B-plus' from 'B-minus' followed by its announcement to issue $1 billion in senior notes. S&P rated it as more risky firm and predicted that the company will suffer cash-flow deficits and debt leverage in the coming years.
On 20th January when company reported its earnings, the company's CEO Reed Hasting, and CFO David Wells in their letter to shareholders stated their plans to invest more in original content. They said: "In the coming years we will be increasing our long-term debt to finance our original content. The best way to finance Netflix content production is long term debts.as long as the maturities and interest cost fits into our content budget."
The additional debt of $1.5 billion secured debt has taken Netflix total debt to $2.4 billion. Netflix already has unsecured debt of $500 million maturing in 2021, and $400 worth that is due in 2024. However, compared to its market capitalization of $27 billion, company's debt does not come across as a mammoth for them.
Presently, on an average, Moody's rated the unsecured debt as 'B rating'. However, Egan-Jones has given a 'BBB+ rating' based upon long term unsecured debt.
Company's shares are down by 0.71% at $441.07, as of 7:59 am EST. The mean 30-day trading volume is 2.53 million shares. Company has 52-week low of $299.50 and 52-week high of $480.29.