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Netflix wants to raise another $ 2 billion in debt

The streaming service announced Monday that it plans to raise $ 2 billion in new debt by offering unsecured banknotes.…

The streaming service announced Monday that it plans to raise $ 2 billion in new debt by offering unsecured banknotes.

The money will be used for “public business purposes”. Netflix (NFLX) says that it may be content acquisition and production costs, along with other investments.

It’s the third time in a year that Netflix has increased the debt in this way. In October, the company offered $ 1.6 billion in notes. There was another round in April for $ 1.9 billion.

The news is on the heels of a good quarter for Netflix. The company announced Tuesday that it has more than 137 million subscribers, of which about 130 million pays for the service.

But Netflix knows that it will have to spend a lot of money if you want to stay on top. The market for streaming services is incredibly crowded. Next year, heavy competitors like Disney (DIS) and the AT & Ts (T) WarnerMedia Division will launch their own services. (AT & T owns CNN.)

New competition also means that Netflix is ​​likely to have less licensed content to broadcast its library. For example, Disney has said it draws content from Netflix prior to the release of its service.

Netflix’s strategy is to increase the amount of original content it produces and distributes, resulting in a few eye-catching totals. The company said last year that it is expected to spend about $ 8 billion on content 201

8. Analysts at research company Cowen say that the company could actually spend as much as $ 13 billion on content this year.

It makes some big investments with the money. Netflix recently bumped TV giants Shonda Rhimes and Ryan Murphy to, for example, exclusive content.

Netflix said last week that it expected a negative free cash flow of approximately $ 3 billion this year and its expectations for next year are similar. Free cash flow measures how much money is generated after the company covers investments in its business.

The shares in the Netflix share increased by about 8% the day after the company posted earnings last week, but the price has since declined. 19659009] Moody’s awarded the latest offer a BA3 or “debris” rating, but allowed Netflix to eventually pay its debts “as the transition from licensed content to produced original content levels and new international markets begin to contribute to profit and total margins are improving. “

The company said that Netflix’s strategy to build its own original content library has” positive long-term consequences “and adds that a content-rich library instead of licensed content is valuable to both consumers and investors.

However, there are risks. Moody’s said that it could further detach Netflix if its negative cash flow levels continue to be high, or if competition begins to destroy the company’s subscriber number.

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