Netflix Raising $2 Billion in Debt Amid Original Content Push

Netflix Co-founder, Chairman & CEO Reed Hastings-Getty-H 2018
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The streaming giant, which has $12.4 billion in long-term debt, said it could use the financing for "content acquisitions, production and development, capital expenditures" and other purposes.

Streaming giant Netflix said Monday it would raise $2 billion via its latest debt offering to boost its war chest for content production and acquisitions, among other things.

The news comes ahead of the launch of new streaming video rivals, including from Disney and Apple, as Netflix continues to focus on producing original shows and movies and license select content from entertainment companies.

The company, led by CEO Reed Hastings, said it would sell approximately $2 billion in U.S. dollar and euros denominated senior unsecured bonds after ending September with $12.4 billion in long-term debt.

"Netflix intends to use the net proceeds from this offering for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions," the company said in a statement.

Los Gatos, California-based Netflix has regularly raised financing via debt offerings in the past as it continues to burn through cash until it becomes what analysts call free cash flow positive. Management has said the firm is on a slow move towards that status. The company recently reported that it used $551 million in cash during the third quarter and reiterated guidance that it would burn through $3.5 billion in 2019, which it expects to be its peak. 

Netflix is investing heavily in the licensing and production of original programming to keep subscribers from canceling their memberships. The company confirmed earlier this month that it will spend $15 billion on content during 2019, its largest annual budget to date. 

Netflix CFO Spencer Neumann on a recent earnings conference call reiterated that the company sees its current negative free cash flow as an "investment in future content to be delivered on our service." He added: "The combination of our scale and our business model transition [to more original content] is well along, and that's why you're going to start to see that free cash flow improvement next year. ... We'll continue to scale gradually towards self-funding while we continue to go after our strategic priorities."