Netflix to Raise $1.5B in Debt for Content and Other Expenses (Updated)
Netflix will take on more than a billion dollars in new long-term debt as it expands both the amount of content — original and acquired — that it offers to subscribers, as well as the number of territories its available in.
The company said that it intends to raise $1.5 billion in long-term debt, which will go toward “general corporate purposes,” which it said may include content acquisitions, capital expenditures, investments, working capital, and potential acquisitions and strategic transactions.
Update: Earlier Monday, Netflix said it planned to raise $1 billion in additional debt. That number grew to $1.5 billion by the evening, with the sale expected to close on February 5, 2015, subject to the customary conditions.
The announcement comes after Netflix’s Q4 2014 earnings report in January, when CEO Reed Hastings and CFO David Wells told shareholders that they plan to raise at least a billion dollars in debt.
“Over the next few years we expect to continue financing our original content expansion with long-term debt,” Hastings and Wells said in the letter to shareholders. “As long as the maturities are spread out, and the interest cost is built into our content budgets, we think long-term debt is the best way for Netflix to finance the production of content.”
Some of that could certainly go toward the company’s ambitious expansion plans — it hopes to be available in 200 countries within the next few years. That sort of reach also requires rights to offer content and original programming for those territories.
As for the debt itself, Netflix said the interest rate, redemption provisions, maturity date, and other terms will be determined by the negotiations it has with the initial purchasers.Tags: financing, Netflix, Reed Hastings