Netflix’s debt stood at $10.3 billion in Q1
Netflix’s (NFLX) debt is about to swell. The company recently announced a plan to borrow $2.0 billion through bond sales. Netflix’s long-term debt stood at $10.3 billion at the end of the first quarter, and the planned debt offering would see the debt rise.
The company says it intends to use the proceeds from the latest debt offering to fund content production and meet other expenses. Netflix runs a cash-hungry content business. Its content costs soared to $12 billion in 2018 from $8.9 billion in 2017, and it’s poised to rise to $15 billion this year, according to a Variety report.
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Replenishing the war chest
As Netflix burns cash through content production, it needs to replenish its war chest, and the pressure to do so just ratcheted up as the company is set to face more competition in the coming months. Walt Disney (DIS) and Apple are preparing to enter the subscription video market with services that will compete for market share with Netflix. Besides, AT&T (T) is planning to launch another video service as it tries to pile more competitive pressure on Netflix, the force behind cord-cutting that’s causing pay-TV subscriber losses at traditional media companies like Comcast (CMCSA) and Dish Network (DISH).
The cash burn at Netflix amid escalating competition saw the company’s record free cash flow of -$460 million in the first quarter, compared to -$287 million a year ago.
Besides funding content production, Netflix also mentioned using the proceeds from the latest debt sale to finance acquisitions.