Netflix plans to refinance $1 billion mainly to promote original drama projects

"the company intends to use the proceeds of this bond financing for general corporate purposes, which may include content acquisition, capital expenditure, investment, working capital, potential acquisitions and strategic transactions," Netflix wrote in a statement on Monday.

original title: Netflix plans to issue bonds to raise $1 billion mainly for the original series

streaming giant Netflix announced on Monday that it will issue bonds to refinance $1 billion.

Netflix raised $1 billion in October last year by issuing bonds, mainly to promote original drama projects. "the company intends to use the proceeds of this bond financing for general corporate purposes, which may include content acquisition, capital expenditure, investment, working capital, potential acquisitions and strategic transactions," Netflix wrote in a statement on Monday.

in a nutshell, Netflix could do anything with the money. But the original drama is still the main driver, and Netflix explained it in an open letter from shareholders last week to allay investor concerns about its debt level.

Netflix wrote in the open letter: "our debt-to-market ratio is less than 10%, which is quite conservative compared with most of our peers, who generally have a debt-to-market ratio of 30% to 70%, and are also very conservative compared with the theory of efficient capital structure. So we will continue to increase long-term debt when needed. "

Netflix reiterated in its open letter that it expects the company's free cash flow to be minus $2 billion in 2017, up from minus $1.7 billion in 2016.

Netflix wrote: "the growth of our original content means that our free cash flow is still around negative $2 billion this year." Although Netflix firmly believes that the company will one day turn its free cash flow into a positive value, investors do not expect this to happen any time soon. This is accompanied by the company's long-term and rapid growth, and debt is inevitable, the company wrote.

Netflix explains: "We have a huge market opportunity and we will optimize long-term free cash flow by actively developing original content. At present, the company's free cash flow is negative because of the substantial growth in original content, and although the operating profit margin is low, it is growing. "

negative free cash flow has been the biggest concern for many Wall Street analysts.

DiClemente, an analyst at Nomura-Instinet, a unit of Nomura, wrote last week: "this is a clich é for Netflix stocks. Will the worry about user growth outweigh the worry about free cash flow?"

Edit: nancy