Moody's Places 'B1' Rating on Netflix's (NFLX) Latest Unsecured Debt Offering

October 24, 2016 9:23 AM EDT

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Moody's Investors Service assigned a B1 (LGD4) rating to Netflix, Inc.'s (NASDAQ: NFLX) new senior unsecured bonds of benchmark size.


Proceeds from the issuance will be used for general corporate purposes and to finance the company's business plan, including increasing investments in original programming and expansion in new international territories. The new senior unsecured notes will rank pari passu with the company's existing unsecured debt and non-debt obligations at Netflix's operating subsidiaries. We estimate that pro forma for the new notes issuance, debt-to-EBITDA (incorporating Moody's standard adjustments) as of 09/30/2016 will be in the 9.5x -- 10x range, which exceeds our 6.0x sustained leverage threshold for the B1 rating. However, based on the company's solid growth trajectory supported by consistent subscriber gains and expectations for positive contributions from international markets in the next couple of years, we anticipate that leverage will decline rapidly (starting in 2017) to well under 5.0x by the end of 2018 and the company will be strongly positioned in its rating category. As a result, the uptick in gross debt and adjusted leverage following the new bonds issuance will not impact the company's B1 Corporate Family rating, Ba3-PD Probability of Default Rating or its B1 senior unsecured debt rating. The SGL-1 Speculative Grade Liquidity rating remains unchanged. The rating outlook is stable.

The principal methodology used in this rating was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on for a copy of this methodology.

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