Netflix junk bond offering draws US$6b of orders

[NEW YORK] Investors took heed of Netflix Inc's advice to get in on the company's bond offerings while they can, pushing the oversubscription rate on its latest debt sale to about three times, according to people with knowledge of the matter.

The streaming service, which is seeking to sell US$2 billion of bonds denominated in dollars and euros, received orders of about US$6 billion between the two currencies, the people said, asking not to be identified as the details are private. The 10.5-year dollar securities may yield around 5.5 per cent, while the euro notes are being marketed around 4 per cent, according to the people.

In a call following first-quarter earnings last week, Chief Executive Officer Reed Hastings told debt investors that they "better get in soon" as the company looks to wind down its borrowing in the future.

Netflix has amassed US$10 billion of long-term debt to continually invest in content, development and production, to which Wednesday's offering will add. Still, it expects to burn through US$3.5 billion of cash this year. Additionally, analysts surveyed by Bloomberg estimate that figure will stay negative through at least the first three months of next year.

The bond sale comes as Netflix's forecast for new subscribers fell short of analysts' estimates. It's been raising prices in some of its largest territories, trying to shift toward profitability as competition mounts from other streaming services including Walt Disney Co, AT&T Inc and Apple Inc.

Morgan Stanley, Goldman Sachs Group Inc, JPMorgan Chase & Co, Deutsche Bank AG and Wells Fargo & Co are managing the bond sale, the people said.

BLOOMBERG