Netflix Is Taking On Another $1 Billion in Debt

Netflix has noted it is looking to soon raise debt.

Netflix announced plans to raise Euro 1 billion in a debt offering.

The proceeds of the debt sale will be used to help with general capital expenditures, but also funding content acquisitions, investments, and transactions related to executing Netflix's strategy. "Our content is working", said Netflix CFO David Wells during the company's earnings conference call with investors last week. "Interest rates are also now attractive in Europe".

At the end of a year ago, Netflix announced it would increase its amount of original programming to 1,000 hours in 2017, including 20 new original series and 30 movies.

Wall Street observers have expected a latest debt offering or other financing round, saying that the streaming video giant would have to raise more money to fund its continued push into originals, which continues to boost its content spending. "Our debt-to-total-cap ratio, at under 10%, is quite conservative compared to most of our media peers at 30%-70%, and conservative compared to efficient capital-structure theory", their letter to investors a few months ago read. The company reported $46.74 million in interest expense for the first quarter of 2017, on revenue of $2.67 billion.

Of course, in overall terms, Netflix's content library is smaller now.

"We have a large market opportunity ahead of us and we're optimizing long-term [free cash flow] by growing our original content aggressively", the company wrote. Even so, its nine-digit milestone is impressive, and Netflix likely counts significantly more users than its main competitor, Amazon Prime, which has not shared exact subscriber figures but is estimated to have about 65 million customers as of February 2017.