Powerhouse streaming company Netflix Inc. announced that it is running its third tap of debt markets in one year. The popular streaming service is looking to raise anywhere up to $2 billion US. The streaming pioneer’s costs have inflated drastically since the overwhelming demand to invest in more original shows and movies and to fight off continuously growing competition.
After Netflix’s announcement, the bond prices moved a fraction. However, those prices are expected to fall to unknown numbers, as the addition of even more financial debt adds to Netflix’s already high credit risk. After the initial announcement, Netflix shares quickly took a fall in early trading.
Netflix executives stated in April that they planned on raising over $1.5 billion US in debt, which brought the total to approximately $5 billion US after raising $1.6 billion US last year. The company’s primary reason for taking on additional debt last year was to help meet the promise of releasing upwards of 80 original movies on their streaming platform in 2018. In a statement last year, they claimed to spend between $7 billion and $8 billion US on content production.
Netflix Inc. has consistently maintained that they expect to fund their content acquisition through high-yield bonds. They are looking at spending $9 billion US on content this year, which is $1 billion more than the initial target, according to the third-quarter results that were announced last week.
The new debt is going to come in the form of senior notes denominated in both US dollars and Euros. It’s the type of debt that they still need to repay if the company goes bankrupt. As of the end of September, Netflix has a total debt of approximately $11.8 billion US.
Netflix made a statement on Monday that claimed they intend to use the net proceeds from the offering for general corporate needs such as content acquisition, product and development, original content, strategy transactions, and potential acquisitions.