Netflix to refinance new credit line
PHYSICAL: Company will double debt, extend due date by five years
By Danny King -- Video Business, 11/2/2009
NOV. 2 | PHYSICAL: Netflix will sell $200 million worth of debt, using some of the proceeds to refinance its six-week old credit line.
The debt will be due in 2017, or about five years later than the $100 million credit line with Wells Fargo that Netflix obtained Sept. 16, the company said in a statement. Netflix, which didn’t specify an interest rate on the new debt, is paying approximately 3.5% on the Wells Fargo debt.
The company will use the additional funds for potential investments, acquisitions and stock buybacks.
The additional debt illustrates the company’s aggressive investment in its video-streaming service. Netflix has been obtaining rights for a broader range of titles — about 17,000 of its 100,000 titles are available in digital form — and reaching agreements with more makers of electronic components that can play the titles on televisions. Last week, Netflix said its digital titles will be playable on Sony PlayStation 3 videogame consoles this month.
Unlike competitor Blockbuster, debt has never been an issue with Netflix, which had no long-term debt as of June 30. Netflix’s third-quarter sales jumped 24% as a higher percentage of its broadening subscriber base took advantage of the company’s video-streaming service.
Blockbuster and Redbox parent Coinstar said in September that they would be looking to raise more than a half-billion dollars in combined debt, indicating that the largest U.S. movie-rental chain and biggest movie-rental kiosk operator believe the credit markets have loosened enough for them to lower their interest expenses by replacing existing financing.
