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Netflix Expects to Again Tap High Yield Markets, Highlighting Equity Cushion

Alongside Neflix’s fourth-quarter earnings rollout today, indicating adjusted EBITDA for the period above consensus forecasts, the issuer noted in a filing that it again intends to seek capital through high-yield markets, three months after the issuer placed $1.6 billion of unsecured bullet notes due 2028.

“We anticipate continuing to raise capital in the high yield market,” the company said in the Monday filing. “The new limitation on deductibility of interest costs is not expected to affect us. We are striving to make the right choices and investments to grow the value of the firm, and that is what also ultimately secures our debt. High yield has rarely seen an equity cushion so thick.”

Netflix 4.875% notes due 2028 rose 1.375 points on the day, to 99.875 in midafternoon trading, according to MarketAxess. Meanwhile, shares of Netflix (NYSE: NFLX) rose 9.3% in postmarket trading, climbing to about $248.50.

The streaming media provider booked adjusted EBITDA for the quarter of $312.9 million, topping analyst estimates by roughly 2.4%, based on consensus data provided by S&P Global Market Intelligence. Meanwhile, negative free cash flow of $524 million for the quarter topped forecasts of about negative $732.8 million. Netflix noted the FCF beat was largely due to the timing of content payments, which will now occur in 2018. Meanwhile, revenue of about $3.286 billion for the period fell roughly in line with estimates.

Netflix reported FCF for 2017 of about negative $2 billion, on the narrower of the issuer’s guidance of negative $2–2.5 billion, and above consensus estimates of roughly negative $2.175 billion for the period.

“In the near term, however, membership, revenue and original content spend are booming,” the company added. “We’re growing faster than we expected, which allows us to invest more in original content than we had planned, so our FCF will be around negative $3 billion to $4 billion in 2018.”

Netflix (Nasdaq: NFLX) is a Los Gatos, Calif.–based global streaming media provider. — James Passeri/ Jakema Lewis