Netflix Prices $500 Million in Debt

Internet Video Streamer Will Refinance $225M in Current Debt
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Netflix announced the pricing of an offering of $500 million in debt after market close Tuesday -- after the company had earlier in the day said it was seeking to raise $400 million in debt financing -- which it plans to use for general corporate purposes, including funding original TV series as well as "potential acquisitions and strategic transactions."

Netflix said the sale of the notes is expected to close on Feb. 1, subject to usual closing conditions. Interest on the notes will accrue at a rate of 5.375% per year, and will be payable in cash semiannually in arrears beginning on August 1, 2013; the notes will mature on Feb. 1, 2021, unless earlier repurchased or redeemed.

Netflix will use $225 million of the net proceeds to redeem its outstanding 8.5% senior notes due 2017, the company said.

Last week, in a letter to shareholders outlining fourth-quarter 2012 results, Netflix CEO Reed Hastings and CFO David Wells said they were “exploring taking advantage of the current low interest rate environment to refinance our $200 million in outstanding notes and raise additional cash through new debt financing. This would give us additional reserves as well as increased flexibility to fund future originals.”

For the fourth quarter of 2012, Netflix added 2.05 million U.S. streaming users, to end 2012 with 27.15 million domestic members. The unexpectedly strong results drove Netflix’s share price up 42% on Jan. 24, the day after the company released results; the stock closed at $169.12 per share Tuesday, up 73% versus a week prior (Jan. 22). The spurt in new subscribers was fueled by consumers who unwrapped new electronic devices, including tablets and smart TVs, during the holiday season, according to Netflix.

As of Dec. 31, Netflix listed $400 million of long-term debt, in two separate $200 million debt transactions. The company had $290.3 million in cash and equivalents at the end of 2012, versus $508.1 million a year earlier.