Is Netflix on the prowl? Streamer to raise $1 billion in debt offering

Netflix on Wednesday said it is raising $1 billion in a debt offering, money that could be used for purchases related to content and potential acquisitions.

In a statement, Netflix said money raised in the debt offering would be used for general corporate purposes that “may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”

Last fall, Netflix telegraphed its plans to sell senior notes for 1.1 billion euros and $1 billion.

Jeffrey Wlodarczak, a principal and analyst at New York-based Pivotal Research Group, said he believes Netflix doesn’t need any capital and that the uncertain economic climate could create opportunities for Netflix to buy a small tech company or acquire more content.

“They are just being opportunistic and prudent after very strong results and given the uncertain global economic outlook,” Wlodarczak said.

The Los Gatos streamer has benefited from the stay-at-home measures caused by the coronavirus crisis. It signed up a record amount of subscribers in the first quarter, as more people are looking for ways to stay entertained. From January to March, Netflix added 15.8 million subscribers, more than double what Wall Street had expected.

Due to the pandemic, many Hollywood productions have been shelved, and it is unclear when work will restart.

Netflix said it has shot most of its 2020 slate and popular shows such as the fourth season of “The Crown” will be released on schedule.

Ted Sarandos, Netflix’s chief content officer, also said in an earnings presentation on Tuesday that Netflix is continuing production in Ireland and South Korea.

The company expects that it will likely spend less on content this year.

“The impact on us is less cash spending this year as some content projects are pushed out,” Netflix said in a letter to shareholders on Tuesday. “We are working hard to complete the content we know our members want, and we’re complementing this effort with additional licensed films and series.”

The company said on Tuesday that its $750 million unsecured credit facility remains undrawn and it has more than 12 months of liquidity and “substantial financial flexibility.” Netflix had $5.2 billion in cash and $14.17 billion in long-term debt in the first quarter.

“Our financing strategy remains unchanged — our current plan is to continue to use debt to finance our investment needs,” the company said.

Other entertainment companies, including Walt Disney Co., which has been hard hit by the coronavirus, have also raised debt offerings amid the pandemic.