Netflix looks to become Debtflix again to fund Warner Bros. acquisition | Fortune

"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."

"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."

"The streaming company, graded A by S&P Global Ratings and a notch lower by Moody's Ratings at A3, is vulnerable to a cut to the BBB tier, the analysts wrote in a Monday note. They recommend selling the company's notes due in 2034 and 2054 given the potential for Netflix to issue signficant amounts of new debt and see its ratings cut."

Netflix intends to borrow tens of billions of dollars to finance a planned $72 billion purchase of most of Warner Bros. Discovery. The company has a stronger balance sheet than before the pandemic, which could allow higher bids while remaining investment grade. Current financing includes $59 billion of temporary bank loans that Netflix plans to replace with up to $25 billion of bonds, $20 billion of delayed-draw term loans and a $5 billion revolving credit facility, with some repayment from cash flow. Paramount Skydance launched a hostile $108 billion bid including debt, roughly $26 billion above Netflix’s offer. S&P rates Netflix A and Moody’s A3, but analysts warn rising leverage could trigger a downgrade into the BBB tier and recommend selling certain long-dated notes. The transaction also faces execution and regulatory risks.

Read at Fortune