Netflix US$2 billion bond offering three times oversubscribed
The streaming company which sold US$2 billion of bonds in a two-part offering denominated in dollars and Euros, received warm investor interest, pushing the over-subscription rate on its latest debt sale to close to three times.
Video streaming provider Netflix is said to have received orders of about US$6 billion for its US$2 billion bonds, people familiar to the offering told Bloomberg.
The streaming company which sold US$2 billion of bonds in a two-part offering denominated in dollars and Euros, received warm investor interest, pushing the over-subscription rate on its latest debt sale to close to three times.
The Euro notes are marketed at around a 4% yield while the 10.5-year dollar securities should yield around 5.5%, the sources said.
The managers of the bond sale are Morgan Stanley, Goldman Sachs Group Inc, JPMorgan Chase & Co, Deutsche Bank AG, and Wells Fargo & Co.
The proceeds will be used for general corporate purposes which may include capital expenditures, investments, production and development, and investing in content.
Debt borrowings to fund business in competitive streaming services market
As competition among other streaming services such as Walt Disney and Apple Inc mounts, Netflix has been trying to shift towards profitability by raising prices in some of its largest territories.
The new bonds will bring Netflix’s long-term debt to around US$12.5 billion. The latest bond issuance marks the seventh time in four years the firm is raising US$1 billion or more through debt.
The firm has been sticking to their plan of using the ‘high-yield market to finance’ its cash needs for this year. According to Moody’s Investor Service, it projects for Netflix to reach a cash-flow break even by 2023, as the firm's total margins increases to the low-to-mid-20% range.
However, the firm has indicated that it looks to taper down on its borrowing in future, as chief executive Reed Hastings told debt investors to ‘better get in soon’ in a call following the first quarter earnings last week.
Netflix has said that it expects to burn through US$3.5 billion of cash this year.
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