Netflix bonds off highs on earnings pressure

Credit: REUTERS/LUCY NICHOLSON

Netflix's bonds have come under pressure on quarterly results that showed a significant loss of subscribers, while the company said it will continue to fund its growth of content via the high-yield market.

LONDON, July 18 (IFR) - Netflix's bonds have come under pressure on quarterly results that showed a significant loss of subscribers, while the company said it will continue to fund its growth of content via the high-yield market.

The company said Wednesday that new shows had been less appealing to customers and price increases had slowed growth in some markets, causing it to lose 130,000 subscribers in the US. Membership numbers more broadly also grew slower than it had forecast.

In Europe, Netflix's €1.1bn 4.625% May 2029s showed the most reaction on Thursday.

The bond lost nearly three points at the open, but has since partially recovered to be down just over 1.5 points at 112.6 bid, Tradeweb quotes showed.

Shares sank 10.4% premarket on Thursday and were on pace to open at their lowest level since late-January, according to Reuters.

The bad results come as competitors including Disney and Apple are preparing to launch rival streaming services.

Nonetheless, Netflix (Ba3/BB-) said it plans to continue using the high-yield market to fund its content investments.

It was last in the market in April, selling US$2.24bn-equivalent of 10.5-year senior notes in dollars and euros. The deal was upsized from the initial US$2bn marketed.

"Netflix notes were trading near the tight end of their recent ranges relative to the company's high-yield cable and media peer group. This left risk skewed to the downside in the event that the outlook for Netflix's subscriber growth came under question," analysts at CreditSights said in a note.

"Looking forward, we think that the magnitude of the Q2 miss was such that Netflix's notes are unlikely to exhibit material traction even if the company manages to deliver on its guidance for a strong recovery in subscriber growth in Q3," they added.

(Reporting by Yoruk Bahceli, editing by Alex Chambers, Julian Baker)

((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))

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