Netflix, a company that built its business on junk bonds, is looking to borrow heavily again.
The streaming company once known as “Debtflix,” before it started generating heavy cash flow, is looking to add tens of billions of dollars of debt to finance its planned $72 billion acquisition of most of Warner Bros. Discovery Inc. But Netflix Inc. has a stronger balance sheet than it did before the pandemic, which will probably allow the company to boost the price it pays in any bidding war that emerges, while remaining investment grade.
“Netflix’s credit profile really turned around,” said Stephen Flynn, an analyst covering telecom and media debt at Bloomberg Intelligence. “They’ve come a long way from high yield.”
The company’s current agreed acquisition includes $59 billion of temporary debt financing from Wall Street banks. The entertainment giant plans to eventually replace that with as much as $25 billion of bonds, $20 billion of delayed-draw term loans, and a $5 billion revolving credit facility. Some will probably also be paid down with cash flow.
The company’s debt load might swell even more now that Paramount Skydance Corp. launched a hostile takeover bid for all of Warner Bros. that values the company at more than $108 billion including debt, around $26 billion more than Netflix’s offer. Either deal would face potential antitrust concerns.
