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Netflix to raise $1.5bn for content

Netflix is raising US$1.5bn in additional long-term debt to spend on content acquisitions, original series and potential acquisitions.

The Californian streamer said it will use the proceeds for general corporate purposes, which could also include capital expenditures, investments, working capital and strategic transactions.

Netflix said yesterday that it planned to raise US$1bn in additional debt, but this has now been raised to US$1.5bn, with the sale expected to close on February 5.

It comes after Netflix CEO Reed Hastings and chief financial officer David Wells last month said the company was planning to raise its long-term debt levels as it looks to expand its content output as part of its international expansion strategy.

“As long as the maturities are spread out, and the interest cost is built into our content budgets, we think long-term debt is the best way for Netflix to finance the production of content,” Hastings and Wells said in a letter to shareholders.

But the move has not been well received by debt-rating agencies, with Standard & Poor’s downgrading Netflix’s debt rating to B+ from BB- as the company’s stock fell slightly.

“We view Netflix’s business risk profile as ‘fair,’ reflecting the company’s leading position in the increasingly competitive and rapidly evolving online video service and its large subscriber base,” its analysts wrote.

“However, Netflix remains dependent on movie and TV studios for content, and we expect the company to increase its investments in original programming, for which success is unpredictable.”

At the end of 2014, Netflix reported US$900m in long-term debt on its balance sheet. The firm issued US$400m in 10-year notes last year, after raising US$500m in 2013.

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