Netflix Ups Long-Term Debt by $2 Billion

Netflix Oct. 21 announced that it intends to offer, subject to market and other considerations, about $2 billion worth of bonds to institutional buyers.

The interest rate, redemption provisions, maturity date and other terms of each series of notes will be determined by negotiations between Netflix and the initial purchasers.

Netflix said it intends to use the net proceeds from the bond sale for general corporate purposes, which includes content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.

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Netflix ended its most-recent fiscal period with more than $12.4 billion in long-term debt. It also has $19.1 billion in third-party content streaming obligations.

Critics cite Netflix’s ongoing negative cash flow as proof the company is operating beyond its fiscal means.

Net cash used in operating activities in Q3 was a negative $502 million, which was an improvement from the negative $690 million used in in the prior-year period. Free cash flow in Q3 totaled negative $551 million compared to negative $859 million in Q3 2018

Netflix contends that with a growing revenue base and expanding operating margins, it will be able to fund more of its content spending internally.

“We are expecting free cash flow to improve in 2020 vs. 2019 and we expect to continue to improve annually beyond 2020,” the service wrote in its shareholder letter. “As we move slowly toward FCF positive, our plan is to continue to use the high yield market in the interim to finance our investment needs.”

 

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