Netflix to Raise $400M in Debt, Potentially to Fund Acquisitions

Internet Video Streamer Will Refinance $225M in Current Debt
Publish date:
Social count:

Netflix may make acquisitions or other “strategic transactions” with its move to raise $400 million in new debt, $225 million of which it plans to use to refinance current debt, the company said Tuesday.

The company said it intends to offer $400 million aggregate principal amount of senior notes due 2021 to institutional buyers. Netflix will use $225 million of the net proceeds to redeem its outstanding 8.5% senior notes due 2017.

Netflix said it intends to use the remaining $175 million of the funds for general corporate purposes, including capital expenditures, investments, working capital and potential acquisitions and strategic transactions.

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.”

They added, “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 as much as 44% on Jan. 24, the day after the company released results. 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.