Tallahassee Journal

Apple, Netflix plan corporate bond sales to raise funds

Apple, Netflix plan corporate bond sales to raise funds

Tech giants Apple and Netflix plan corporate bond offerings of $5 billion and $1 billion, respectively, as a quick way to raise capital for share buybacks and other expenses. With global interest rates so low, the two companies can use the bond offerings to raise funds relatively cheaply, rather than spend cash on hand.apple-store

Shares of both companies fell about 1.5% when the market opened. But both recovered by noon, with Apple back at its $118 opening price and Netflix rallying to $442.33, up slightly from the opening price of $439.90. For its part, Apple has $178 billion in cash and just two years ago sold $17 billion in what was then the largest corporate bond sale in history. It was surpassed later in 2013 by Verizon’s $49 billion bond offering. Overall, Apple has issued $32.5 billion of bonds in three offerings since April 2013, according to Bloomberg.

Netflix, however, finished the fourth quarter with $1.6 billion in cash on hand. CEO Reed Hastings, in the company’s recent fourth quarter earnings note to shareholders, said the streaming video provider would seek to raise funds to help pay for the growing costs of creating original content.

“Given we are investing faster in content (this Q1 will show a step up in cash use with all the original projects launching in the quarter) and the current favorable interest rate environment, we intend to raise at least a billion dollars, pending market conditions, of additional long-term debt in a similar manner to last year,” he said. “As long as the maturities are spread out, and the interest cost is built into our content budgets, we think long-term debt is the best way for Netflix to finance the production of content,” Hastings said.