California’s Los Gatos-based Netflix is all set to raise a gargantuan amount of US $2 billion to build its streaming empire. Now the streaming media giant is eying toward debt markets to fund more shows. It announced on September 22 that it has a plan to take on US $2 billion in new debts by offering a new round of unsecured bank notes.
It is the third time Morgan Stanley and Reed Hastings owned internet streaming company is raising the debt this way. The company offered US $1.6 billion and US $1.9 billion in notes in October 2017 and April 2018 respectively.
The causes of issuing a new round of notes are “general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital, potential acquisitions and strategic transactions.”
Netflix, which is known for producing hits like “13 Reasons Why” and “Stranger Things” shows, has recently reported almost US $12 billion in total debt as of September 30, 2018. Its rising self-produced content that needs funding during the production phase is the primary cause of working capital requirements, which generates the gap between its positive net income and free cash flow deficit.
According to CNBC, a negative free cash flow of US $859 million is being reported by Netflix in its last week’s third-quarter earnings report. It further expects a negative free cash flow of US $3 billion for entire 2018. The concept of free cash flow is to calculate how much cash is earned after the organization covers investments in its business.
While having over 137 million subscribers worldwide, Netflix is currently confronting severe competition due to the venturing of traditional media companies into the streaming world. Now Walt Disney is also planning to launch its streaming apps to enable its viewers entertaining series, movies, sports channels, etc.
Apart from bringing in popular shows, Netflix has recently poached “American Horror Story” mastermind Ryan Murphy and “Grey’s Anatomy’s” executive producer Shonda Rhimes to make exclusive contents, as reported by CNN Business. The company earlier revealed that it would invest about US $8 billion on content this year, whereas Cowen research firm stated that it might spend the average US $13 billion on content in 2018.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]