Netflix last tapped the bond market in February, 2015, when it sold $1.5-billion of notes.Ryan Anson/AFP / Getty Images
Netflix Inc. is increasing a bond offering to $1-billion (U.S.) from $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. Netflix may sell the notes as soon as Monday, the person said.
"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 $55-billion. With $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 the company an equivalent B+.
The Los Gatos, Calif.-based company last tapped the bond market in February, 2015, when it sold $1.5-billion of notes, $500-million more than it initially planned. The notes, which were issued at par, have since become a favourite with investors. The company's $800-million of 5.875 per cent 10-year notes due in 2025 traded at 111.75 cents on Monday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. are managing the sale, the person said.