Netflix said to boost bond deal for content

Raises debt offering to US$1B

Netflix Inc. is increasing a bond offering to US$1 billion from US$ 800 million as investors hanker for a piece of the deal that will help fund the streaming company’s content expansion, according to a person familiar with the matter.

The 10- year notes may yield around 4.375 per cent, said the person, who asked not to be named because the deal is private. That’s the lowest yield ever for a dollar debt offering from a U. S. company of that maturity and rating, according to data compiled by Bloomberg.

Proceeds will be used for purposes that include acquisitions and capital expenditures, Netflix said in a statement Monday.

“Most people are pretty constructive on the name given the massive equity cushion,” said John McClain, a portfolio manager at Diamond Hill Capital Management. “You don’t find businesses this big in terms of enterprise value in high yield.”

Netflix generates little or no profit and its programming budget is still burning through funds, but it has a market capitalization of US$ 55 billion. With US$ 1.3 billion in cash at the end of the third quarter, Netflix said during its Oct. 17 earnings call that it planned to borrow in the coming weeks. It plans to boost its original content offerings to 1,000 hours in 2017, up from 600 this year.

Moody’s Investors Service rated the bonds B1, or four steps into junk, in a statement on Monday. S& P graded t he company an equivalent B-plus.

The Los Gatos, Calif.based company last tapped the bond market in February, 2015, when it sold US$ 1. 5 billion of notes, US$ 500 million more than it i nitially planned. The notes, which were issued at par, have since become a favourite with investors. The company’s US$800 million of 5.875 per cent 10-year notes due in 2025 traded at US111.75 cents on Monday, according to Trace, the bondprice reporting system.