Netflix, Inc. To Offer $1 Billion In Senior Notes

Netflix, Inc. To Offer $1 Billion In Senior Notes

Also last week some Netflix insiders, including CEO Reed Hastings, unloaded some shares of the company

Netflix said today in a press release that it plans to sell $1 billion worth of senior notes. It must be a good day for corporations to sell off some new debt, as Apple disclosed similar plans today as well, revealing intentions of selling up to $5 billion worth of corporate bonds.

Netflix discloses plans to sell debt

The press release states that Netflix intends to use the proceeds for “general corporate purposes.” The video streaming company may use the funds to acquire more content or possibly make an acquisition or “strategic transactions.” Other planned uses include capital expenditures, investments and working capital.

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Netflix said it will negotiate the interest rate, maturity dates, redemption provisions and other terms with the purchasers of the notes. The notes will be offered to “qualified institutional buyers” under Rule 144A of the amended Securities Act and non-U.S. individuals qualified under the Securities Act’s Regulation S.

Netflix keeps rolling out original content

The company has been spending money right and left in its attempts to stay ahead of the competition. Management said earlier this month that they plan to launch 20 new original shows per year, demonstrating just how serious Netflix is about differentiating itself from competitors with its own exclusive content.

For the most part, the company’s original shows have been highly successful so far, garnering Netflix multiple major awards. The third season of House of Cards, one of the company’s biggest blockbusters, is one of the next to be released. It’s scheduled for Feb. 27.

Netflix’s credit rating downgraded

According to Deadline, two major debt ratings companies have downgraded Netflix. Standard & Poor’s Ratings Services cut its rating on the company’s bonds to “junk” status—from a BB- to a B+ rating. That basically means S&P sees the bonds as being too risky for pension funds and certain other types of restricted funds.

Moody’s Investor Service also sees Netflix’s debt as being too risky and rates it at B1.

Indeed, the company has been adding to its debt year after year, reporting $900 million in long-term debt at the end of 2014. Just last year, Netflix issued $400 million worth of 10-year notes, and the year before, the company raised another $500 million.

All this debt-raising understandably has the credit ratings nervous.

Netflix insiders move shares around

On a side note, Netflix insiders have been selling off some of their shares recently. In a filing dated Jan. 30, director Jay Hoag disclosed that he had exercised some of his stock option and sold off hundreds of thousands of shares. Director Richard Barton picked up 25 more Netflix shares at a price of $0 per share, indicating that it’s part of a stock award.

CEO Reed Hastings also picked up and sold some shares. He dumped all of the shares he directly owned in a series of transactions on Jan. 26. After those sales, he still held 931,660 shares of his company indirectly through a trust.

Shares of Netflix slipped by as much as 0.48% during regular trading hours today, falling as low as $439.66 per share.

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