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Internet streaming service provider Netflix on Monday announced that it will raise $1.6bn through debt financing. The money raised will eventually become part of the dedicated $8 billion fund that will be spent on developing new shows & original contents next year. In the current year, the company has also already spent nearly $6 billion for creating original contents.
Netflix further disclosed through an official statement that this debt fund will also be used for host of other business operations, including production & development, capital expenditures, investments, working capital & strategic transactions.
Netflix’s upcoming fund raising will be the largest so far and fourth time in three years that it will be raising more than $1bn by issuing bonds.
The announcement comes closely on the heels of last week’s impressive earning report, with the company once again reporting robust growth in its subscription base. The streaming giant hopes to further increase the subscription base by spending more on original contents next year. The upcoming original shows will also be critical for maintaining Netflix’s domination in the prestigious Emmy Awards.
But several investors are still wary about as to how the company will deal with high cash burn rate and debt interest costs, arising from financing new shows. However, Netflix may have already partly addressed these concerns by increasing its subscription fees earlier this month.
Many analysts believe that Netflix’s recent decision to increasing subscription fees was propelled by the need to finance its new shows and lower the pressure on cash burn rate. The company had increased HD plan’s subscription fees to $10.99 from $9.99 and 4K plan to $13.99 from $11.99.
