Netflix is extending its plan to finance its growth though debt financing, adding $2 billion in debt to raise its total to $12 billion.
In a press release Tuesday morning, the streaming giant said it would offer unsecured notes in U.S. dollars and in euros in two series of notes. The interest rate, redemption provisions, maturity date and other terms will be determined by negotiations between Netflix and the initial buyers, the company said.
Prior to announcing the bond offering, Netflix also issued a proxy statement detailing executive compensation for 2018, with CEO Reed Hastings collecting $36.1 million in salary, bonus and stock awards, up from $24.4 million in 2017. Chief Content Officer Ted Sarandos made $29.6 million, up from $22.4 million in 2017. The proxy also revealed that the company’s annual shareholder meeting will be held June 6.
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Echoing the guidance it has given Wall Street for years, Netflix said it intends to use the net proceeds from the debt offering for general corporate purposes. That could include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions. The company made a similar offering last fall.
Netflix last week reported solid first-quarter financial results, and now has just shy of 149 million subscribers worldwide. While the subscriber tally came up just short of analysts’ estimates, several financial metrics beat them. Even so, the company’s stock sold off a bit after hours as skeptics pointed to the company’s debt load as well as a likely hit from a price increase and hotter competition. Shares have since rebounded and have been trading above $380 today, their highest level of 2019,
Moody’s issued a Ba3 rating on the new notes, which is a couple of notches from the top, but still a solid outlook. The credit ratings agency said it buys Netflix’s long-term strategy.
“Despite the continuing issuances of debt to fund the company’s negative cash flows, we expect leverage to drop gradually over time with subscriber growth, as the transition from licensed content to produced original content levels off, international markets mature and begin to contribute to profits, all which we expect to contribute to margin improvement,” the company said.
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