Netflix to wade deeper into debt in pursuit of content

Moody's Investors have assigned a "Ba3" junk-bond rating to the streaming firm's latest offering, grading it "speculative"


Netflix has announced it plans to reenter debt markets in order to fund its upcoming content obligations. The online streaming service hopes to raise another $2bn in financing through debt securities.

This latest round of financing will further balloon Netflix's $8.34bn in long-term debt as reported in September 2018, representing an increase of 71% on last year's amount of $4.89bn. It will also mark the sixth time in the past four years that Netflix has raised $1bn or more through bonds.

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Despite Netflix's continued reliance on debt markets, the company has outperformed all expectations for new subscriber growth in 3Q18, amassing 7 million new subs, of which 1.09 million were based in the US.

Netflix's cash expenditure is mainly down to the company's intent to create more original content, especially in anticipation of speculated content streaming services by Disney and WarnerMedia. Netflix has already informed investors that they should expect this spending trend to carry on into 2019, as it predicts this year's total free cash flow to be around -$3bn.

Commenting on its latest financing decision in a letter to its shareholders, Netflix said: "We recognize we are making huge cash investments in content and we want to assure our investors that we have the same high confidence in the underlying economics as our cash investments in the past.

"These investments we see as very likely to help us to keep our revenue and operating profits growing for a very long time ahead," it added.

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