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Netflix selling US$2b of junk bonds to fund new shows
[NEW YORK] Netflix Inc is once again turning to the junk-bond market to fund new programming as the streaming-video giant seeks to maintain its torrid subscriber growth.
The US$2 billion bond offering, which will be issued in dollars and euros, comes just a week after the company reported a bigger jump in subscribers than Wall Street analysts expected. The bonds would push the cash-burning company's debt load above US$10 billion for the first time. Netflix's market value has soared almost 70 per cent this year to about US$140 billion.
Netflix said in a statement that it will use proceeds from the offering to continue to acquire and fund new content. The company said last week that it expects to burn about US$3 billion in cash this year as it continues to prioritize original series and movies. Morgan Stanley, Goldman Sachs Group Inc, JPMorgan Chase & Co, Deutsche Bank AG and Wells Fargo & Co are managing the sale of the 10.5-year bonds, according to a person familiar with the matter.
Impressive subscriber growth and revenues have given the Netflix leeway to continue to spend massive amounts of money to fund its programming. Last week, S&P Global Ratings upgraded the company's credit by one level to BB- and raised its outlook to stable from positive. Moody's Investors Service raised its rating in April, when the company last issued bonds.
The company's announcement comes a few days after Uber Technologies Inc raised billions of dollars of cash by tapping the high-yield bond market in a private placement. Demand for the debt has been spurred by the worst supply shortage since 2008, according to JPMorgan analysts, and the higher demand kept a lid on relative borrowing costs even as the Federal Reserve hikes interest rates.