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Reading Netflix's New $16B High-Yield Debt

Published Mon, 11 Dec 2017 14:29:21 -0500 on Seeking Alpha

Netflix's (Nasdaq: NFLX) large debt issuance in October has swung wildly the past two months as product announcements from Disney (NYSE: DIS) have raised worries about Netflix's continued dominance of the U.S. content-streaming market.
Based on the debt's price action, Netflix seems to have been able to quell many of the worries in the immediate aftermath of Disney's November announcement of an attractive alternative service, although there remains increased uncertainty now than there had been during the bond's original issuance in October.
I. Netflix's As The King of Debt Netflix is well-established as consistently choosing to load up significant amounts of debt to finance its ever-increasing content expansion costs.
While the way Netflix burns its cash amid ever-increasing costs and debt has worried investors for a while, Netflix embraces it as inherently part of its business model at the moment.

(Source: Netflix 2016 10-K, SEC)
The October 2017 $1.6 B USD-denominated issuance at 4.875% (April 2028 maturity, CUSIP USU74079AH47) beat Netflix's previous junk-bond high of $1.53 B in 10-year euro-denominated bonds in May 2017 (May 2027 maturity).
At the time, the October 2017 4.875% junk-bond issuance (rated B1 by Moody's and B-plus by Standard & Poor's) was at the following spreads:
1.525% spread above AAA 10-year bonds (3.35%) 2.423% above 10-year US Treasuries (10/26/17 close of 2.452%)
Based on the... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
NETFLIX 278.52   222.8 1.25 0.00 0.00


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