Netflix plans to issue a $1.8 billion debt offering, per an SEC filing published Tuesday.

It’s the company’s first debt offering since it was elevated to investment-grade status by rating agencies Moody’s and S&P Global.

The last time Netflix raised funds via debt offering was in April 2020.

Also Read: Netflix Solidly Beats Revenue Forecasts With 17% Growth in Q2, Adds More Than 8 Million Subscribers

Netflix said the move, which was also announced in its quarterly letter to shareholders, will used to refinance its existing debt, which is due next year, as well as what it calls “general corporate purposes.”

The banks designated as joint book-running managers are Morgan Stanley, Goldman Sachs, JP Morgan Securities, Wells Fargo Securities, Citigroup Global Markets, Santander US Capital Markets and SG Americas Securities.

“Our management will have broad discretion in the application of the net proceeds,” wrote Netflix in its prospectus. “The purposes for which they are used may change from those described above.”

Notably, Netflix recently entered into pricey deals with the WWE and NFL in order to expand its sports offerings.

The streaming giant’s partnership with the wrestling league will cost it as much as $5 billion over 10 years, while the two NFL games set to broadcast on Christmas Day will cost a reported $150 million.

Netflix’s debt sale will occur in two parts: $1 billion due in 2034 with 4.9% interest, and $800 million due in 2054 with a 5.4% interest rate.

About seven years after embarking on a bold new strategy to transform itself into a media company, AT&T is months away from becoming a phone company again. But merely selling off its media assets -- and getting very little in return -- won’t solve all of the telco’s problems, says MoffettNathanson senior analyst Craig Moffett.

AT&T spun off DirecTV to TPG last year, in a deal that valued the satellite TV giant it bought for $65 billion in 2015 at about $16.5 billion, and is nearing the finish line in its spin off of WarnerMedia to Discovery Inc., a deal that will net AT&T $48 billion in cash and give its shareholders a 71% stake in the new entity. In a research report Thursday, Moffett wrote that although it's about time AT&T acknowledged its media experiment was a horrible mistake, merely selling off those assets won’t get it out of the hole the company has dug for itself. 

Taking a look at AT&T’s share performance over the past five years is a big indication of how dalliances with media have mostly had one effect -- seriously eroding value. 

Investors weren’t really pleased when AT&T said it would buy DirecTV back in 2015, driving the stock down about 6% from $36.38 per share when the deal was announced on May 18, 2014 to $34.29 each when it closed on July 24, 2015. But despite paying a hefty price for DirecTV just as the satellite TV provider was beginning its downward spiral (it would lose about 7 million subscribers over the next seven years). AT&T managed only to slightly underperform the S&P 500, lagging that index by about 3.6%, according to Moffett. But when AT&T doubled down on media and announced a $100 billion deal to buy Time Warner on October 22, 2016, the real slide began. For the next four and a half years, according to Moffett, AT&T stock trailed the S&P 500 by more than 100 percentage points.

So, it would seem logical that if investors hated AT&T as a media company, they’d love it when it finally unwound that whole mess, right? Not a chance. Since announcing the TPG deal in February 2021 and the WarnerMedia Discovery deal in May 2021, AT&T stock has underperformed the rest of the market by 29%, per Moffett. Over the full seven-year period, AT&T lagged the S&P 500 by 176 percentage points, making it one of the  worst performing stocks in the index over that time frame.    

Also: AT&T Investors Bail as Discovery Close Nears 

In his report, Moffett said there are two conclusions to take from that “soul-crushing trip down memory lane:” One, that the underlying telecom business was shaky to begin with; and two, that “the damage from the two acquisitions can’t be undone simply by selling them off.”

At the heart of AT&T’s problems are its debt, currently at about $153 billion as of December 31. According to Moffett, the DirecTV deal was less a sale than a leveraged recapitalization, so it won’t have much effect on its debt load. The WarnerMedia merger, expected to close in the second quarter, will pump about $48 billion in cash into AT&T’s coffers at least partly to pay down debt. But even after that cash infusion, AT&T will have obligations of well over $100 billion.

Also: Eureka, AT&T is a Phone Company Again 

While other companies have carried huge debt loads while managing growth businesses -- the cable industry for one -- Moffett’s biggest fear is that the wireless business, which will account for the majority of AT&T’s total business, isn’t growing as much as it used to.

AT&T added about 884,000 postpaid wireless customers in Q4, but the majority of those gains have been won through deep, deep discounting. And customers that sign on for a free handset or free months of service tend to go away when they see another promotion elsewhere.  

Also: AT&T and TPG: There is No Why 

According to Moffett, AT&T service revenue was up about 3.2% in Q4 while operating revenue rose about 4.2%. Back out WarnerMedia, video and Vrio (its Latin American operation sold to Groupo Werthein in November) and operating revenue grew 1% and service revenue was down 0.3% in the quarter.

Cash flow in the new core businesses also will be hit hard by the DirecTV and WarnerMedia sales. Moffett wrote that AT&T’s pro forma organic EBITDA growth in Q4 was 0.0%.

“Investors might be forgiven for their lack of celebration about stripping to this particular core of assets,” Moffett wrote. ■

S&P Global said Thursday that it has raised its credit rating on Mediacom Communications one notch to BBB+/Stable after the cable company lowered its leverage ratio to 1.4 times EBITDA, and committed to keeping the metric below 2 times for the foreseeable future.

Mediacom previously had a BBB/Stable rating -- which is also considered to be investment grade --  on its debt, and the increase will make it easier for the company to access capital markets at favorable interest rates. S&P Global said Mediacom’s leverage commitment is well below the ratings agency’s BBB rating threshold of 2.5 times EBITDA.

S&P said the "stable" outlook reflects Mediacom’s predictable earnings growth and cash flow generation, which enables the company to lower its leverage by about 0.5 times per year.

S&P said Mediacom has consistently reduced its debt since going private in 2011. While it could beef up its debt in the future, especially if it considers a strategic acquisition, the ratings agency said that the commitment to keeping leverage at 2 times or lower gives it “greater clarity into the limitations on the magnitude of any potential re-leveraging.”

In raising Mediacom’s credit rating, S&P said it believes Mediacom has an affordable network upgrade path to ensure its place as the fastest provider of broadband service in its territories, and that its capital expenditures-to-revenue ratio should remain flat at about 15%. 

“Therefore, we expect cash flow conversion rates to continue to improve with higher EBITDA margins supported by solid, albeit moderating, HSD growth,” S&P said, adding that it expects annual broadband EBITDA growth of between 4% and 6% and average revenue per unit (ARPU) growth of 5% to 8% over the next two years. ■ 

Sinclair Broadcast Group’s failure to secure carriage of its regional sports networks as part of its broader retransmission consent deal with Dish Network sent bonds for Diamond Sports Group, the subsidiary that holds the RSNs, tumbling on Monday.

According to Bloomberg Law, Diamond Sports Group’s 5.375% bonds due in 2026 dipped 4.5 cents on the dollar to 52.75 cents, and its 6.625% high-yield notes due 2027 fell 6 cents to 27.25 cents on the dollar. Back on Nov. 3, Wells Fargo Securities media analyst Steven Cahall wrote in a research note that the Diamond Sports Group unsecured bonds were priced at about 26 cents on the dollar.  

The bond pricing is critical because it reflects the sentiment of Diamond Sports Group debtholders, who are being asked to restructure about $8 billion in debt tied to the RSNs, as well as pump another $500 million to $600 million in cash to help finance the unit’s planned direct-to-consumer RSN offering slated for next year. 

Earlier on Monday, Sinclair said it had reached a long-term retransmission consent agreement with Dish for its 144 broadcast TV stations and Tennis Channel. While that deal helped lift Sinclair stock up nearly 3% (68 cents each) to $26.87 per share on Monday, the lack of RSN carriage seemed to spook bondholders yet again.  

Also: Does Sinclair Plan on Taking Bally Sports RSNs Direct-To-Consumer Via ATSC 3.0 Broadcast 

Sinclair had been counting on the Dish agreement to include the RSNs -- in earlier filings the broadcaster had appeared to include revenue from Dish as a portion of its overall projections for the linear networks.   

On Nov. 8, Sinclair said it had purchased Diamond’s existing accounts receivable securitization agreement from lenders and agents for about $184.4 million, a move that he wrote could be a cause for some concern for investors if it meant that the broadcaster could assume more responsibility for Diamond’s debt. One of the few bright spots for the RSNs is that their debt was held separately from Sinclair.  

“To say that SBG will become the back-stop of Diamond's bonds/debt is certainly a bridge too far at this point, but the initial reaction to this announcement is one of worry,” Cahall wrote on Nov. 8.

Some analysts had hoped that Sinclair could use the leverage of the broadcast stations to secure carriage of the sports channels, but that was not to be. With the Major League Baseball season finished and NBA basketball underway, there is little incentive for Dish to make a deal for the RSNs this year. That leaves investors to wait until March, when Sinclair’s carriage deal with Charter Communications is set to expire. ■

Dish Network, almost six months after raising about $2 billion in a convertible note offering to help fund its wireless ambitions, said Monday that it would raise another $1.25 billion by issuing senior notes, in part to refinance some of its debt.

Dish raised about $2 billion in the December convertible note offering, a move some critics said was a sign that it couldn’t find a partner to help fund building out its wireless network. Since then Dish said it had signed up Amazon Web Services  (AWS) as the cloud services vendor for its 5G wireless offering. 

The latest offering will be made through Dish subsidiary Dish DBS Corp., and will be sold to institutional investors. In a press release, Dish said the proceeds of the offering will be used for general corporate purposes, including "refinancing of indebtedness." 

Moody’s Investors Service raised its credit rating on Netflix Thursday to Ba1 -- one notch below investment grade -- adding that despite fears that lockdown-related customer growth could wane, the momentum should continue throughout the year.

Pandemic lockdowns helped push Netflix subscriber growth to record heights in 2020 -- fueled by a second half customer surge -- and that growth should continue as entertainment options remain limited, Moody’s senior VP Neil Begley said in his report. 

"The performance of Netflix in the second half of 2020 materially exceeded our forecasts at the time we placed a positive outlook on the ratings a year ago," Begley wrote. “These favorable developments are pulling forward the credit improvement trend by as much as another year and have resulted in a two-notch upgrade and maintaining a positive outlook.”

Also Read: Netflix Ups the Ante with Latest Deals 

The upgrade brings Netflix’s long-term credit rating one notch below investment grade, which would mean lower interest rates and better access to capital markets. Netflix has about $14 billion in long-term debt and has pledged to keep its leverage in the $10 billion to $15 billion range as it generates more cash.  

The SVOD pioneer added about 8.5 million U.S. and international subscribers in Q4 2020, far outpacing its own prediction of 6 million additions. For the full year, paid net subscriber additions were 37 million, a record for the company. Those increases came despite a price increase implemented in October that raised the cost of the most popular Netflix subscription from $12.99 to $13.99 per month. 

Netflix is scheduled to release its first quarter results on April 20. When it released Q4 results in January, the company issued guidance that it expected to add about 6 million customers worldwide in Q1.

Begley expects subscriber additions to remain volatile quarter-to-quarter as they have in the past, adding that a leaner content pipeline in the early months of the year could affect subscriber growth until production catches up. 

“But we also believe that the medium and longer-term outlook remains very favorable for the company as it continues to build on its significant scale to penetrate global addressable homes of over 1.5 billion, sustaining competitively low cost per viewing hour leadership, growing average revenue for members, and reinvesting in even more content as it benefits from this virtuous cycle,” Begley said.

AT&T has again tapped the bond market, this time for $12.5 billion, to help it pare down debt as the economic uncertainty surrounding the COVID-19 pandemic rages.

According to documents filed Friday with the Securities and Exchange Commission, AT&T will commence the bond offer in five tranches -- $2.5 billion in notes due 2027; $3 billion in notes due 2031; $2.5 billion in notes due 2041; $3 billion in notes due 2051 and $1.5 billion in notes due 2060 at interest rates ranging from 2.3% to 3.85%. Proceeds from the bond offerings will go toward paring down higher interest bond debt that is slated to come due in 2020, 2021 and 2047.

This is the third time this year AT&T has tapped the debt markets. It launched a €3 billion ($3.2 billion) bond offering earlier in May for general corporate purposes, including debt retirement and in April said it had arranged a $5.5 billion credit agreement with a consortium of banks led by Bank of America.

AT&T and other media companies have used access to the debt markets to provide liquidity during the COVID-19 pandemic. Earlier this week, Comcast issued about $4 billion in bonds to refinance debt, and Discovery Inc. said it closed early on a cash tender offer for about $1.5 billion in old bonds. 

AT&T stock rose more than 5% in early trading Tuesday after the telco said it had entered into a new $5.5 billion loan agreement with a dozen banks, at the same time assuring investors that it has more than sufficient liquidity to get through the current COVID-19 scare.

AT&T is just the latest in a series of companies that have tapped the debt markets for cash as the coronavirus forces Americans to stay at home. Several companies have already tapped the bond markets for cash -- including The Walt Disney Co. and Comcast -- while others have drawn on existing lines of credit -- like Discovery Inc. -- to ensure they will have sufficient cash to run their businesses as COVID-19 strains the ad business and other sectors.

The loan comes as some analysts had worried whether AT&T would be able to make its stock dividend commitments. AT&T said on March 27 that its board declared a dividend to be payable to shareholders of record as of April 9, payable on May 1. AT&T also reassured investors that the status of its pension fund is essentially the same as it was last year and that there are no funding requirements in the near term and it does not anticipate any required contributions through 2022.

“AT&T’s pension plan assets are invested conservatively and are well diversified,” the company said.

Related: Stocks Rise as COVID-19 Spread Seems to Slow

AT&T said in a statement announcing the loan -- of which Bank of America is the lead lender -- that it had about $12 billion in cash on hand as of Dec. 31 and received another $4 billion from preferred stock issuances in February. The company canceled its stock repurchase plan on March 20 and said it expects another $2 billion from the sale of its Central European Media Enterprises (CME) business  and other smaller diviestitures and that it will use the proceeds from the sale of its Puerto Rico and U.S. Virgin Islands operations later this year to retire an outstanding interest. In addition, AT&T said it has continued access to the commercial paper, bond market and other financing activities and has a fully committed $15 billion revolver in place that it “has no need or plans to use in 2020.”

AT&T shares went as high as $30.97 in early trading April 7, up 5.2% ($1.53 each). The stock closed at $30.08 each, up 2.2% or 64 cents per share.

“The strength and relevance of our core subscription businesses, our continued execution on our business transformation initiatives, and sizing our operations to economic activity will provide cash from operations that will support network investments, dividend payments and debt retirement, as well as the ability to invest in business opportunities that arise as the economies recover,” AT&T said in its statement.

AT&T said it would provide more information on COVID-19 impacts on its Q1 earning call scheduled for April 22.

Frontier Communications is expected to file for Chapter 11 bankruptcy protection within the next two weeks, part of a sweeping restructuring plan that would include swapping about $11.7 billion in debt for equity, as well as possibly selling off some assets.

According to a 10-K annual report filing with the Securities and Exchange Commission on March 31, Frontier said it has been in discussions with its bondholders since January. Frontier had been expected to file for Chapter 11 protection for months. Last month it said it would exercise its right to defer about $322 million in interest payment on its debt for 60 days, a move that many saw as a precursor to a prepackaged Chapter 11 filing. In its 10-K, the company said it would defer a $6.8 million interest payment due on April 1 as it continues to negotiate with bondholders over the restructuring.

Frontier still needs its bondholders to sign off on the plan, so there is no guarantee that the proposal will be approved. But the company did say in the documents that a Chapter 11 filing could commence "no later than April 14." 

Frontier outlined a presentation it gave to bondholders in SEC filings regarding that restructuring, blaming its past problems on a serious under investment in fiber infrastructure and an inability to capitalize on the fiber assets it had.

According to the filings, Frontier’s broadband service is available to about 14 million homes, but only 3 million of those residences are passed with fiber. According to the filing, most of Frontier's broadband customers have low-speed digital subscriber line service (DSL). About 30% of its customers have service with download speeds of 0-12 megabits per second; 35% have download speeds of 13-24 Mbps and only 6% have download speeds of 24 Mbps or higher. The company has managed to survive mainly because in many of its markets it is the only provider.

Frontier admits that it has not invested in fiber over the years. And it believes that if its restructuring plan is approved, it would have the necessary capital to build out its network. But even then it said it would only invest about $1.4 billion -- part of that possibly coming from the FCC’s Rural Digital Opportunity Fund -- through 2024.

Frontier’s biggest problem is its debt, currently at about $17.5 billion, accumulated through a series of now questionable acquisitions over the past few years, mainly its $10.5 billion purchase of Fios assets in California, Florida and Texas in 2016. Those obligations have prevented the company from investing adequately in its network and as subscribers continue to defect from its broadband services, its financials have faltered.

Revenue has been on a steady decline over the past few years -- $9.1 billions in 2017 to $8.1 billion in 2019 -- and is expected to fall further in 2020. Net losses have tripled in the same time frame, from $1.8 billion in 2017 to $5.9 billion in 2019.

By increasing its emphasis on fiber, Han and the rest of the Frontier team believe they can begin to reverse the company's history of declines, but it will take time. According to the SEC filings, Frontier doesn’t expected to turn a profit

Current Frontier stockholders would likely be left in the lurch in a Chapter 11 filing -- in most of those cases, current equity is valued at 0 and retired and replaced with shares in a new entity.

Frontier hired former Dish Network chief operating officer Bernie Han as its CEO in December, and he has been working hard to hammer out a deal with bondholders. According to the SEC filings, Frontier believes with its debt problems out of the way and a new focus on fiber, it can grow revenue and cash flow over time.

But it wouldn’t be immediate. According to the restructuring plan, Frontier revenue would decline over the next four years -- from about $7 billion in 2020 to about $5 billion in 2024 -- as it shifts from a legacy copper-based business to a fiber-centric operation. But by 2024, when fiber accounts for 47% of revenue (it’s at about 34% now), it will have a customer base that is more profitable. By Frontier’s estimates, fiber cash flow will grow at a 6.1% clip from 2019 to 2024, and at a 10.2% rate between 2024 and 2031. Cash flow at the legacy copper business is expected to decline from about $2.2 billion in 2019 to $900 million by 2031.

Mediacom Communications said Monday it has completed $2.17 billion in debt transactions, deals that will lower its interest payments significantly and extend maturities on certain obligations.

The deals include about $745 million of revolving credit facilities and $1.425 billion in bank term loans for its Mediacom LLC and Mediacom Broadband LLC subsidiaries.

In a press release, Mediacom said the transactions extended nearly 80% of its debt maturities to March 2025, with the remainder due February 2024. The deals also reduced the average interest rate on Mediacom’s total outstanding debt from 4.2% in Q1 2019 to under 2.5%, an all-time low for the company. As a result, Mediacom’s annualized interest expense dropped from $99 million in Q1 2019 to under $53 million currently, another all-time low for the company.

“We are very pleased with the execution of these financing transactions, particularly given the extreme market turbulence caused by the coronavirus pandemic since we launched the syndication three weeks ago,” Mediacom founder, chairman and CEO Rocco Commisso said in a press release. “The debt markets recognize that Mediacom is among the strongest financially in the U.S. cable sector, with the lowest cost of debt relative to other major cable companies. We are grateful for the steadfast support of our long-time banking relationships and, at the same time, we welcome our new lenders. As always, I am thankful for the tremendous work and determination of Mediacom’s 4,500 employees, who produced excellent financial and operational results in 2019, highlighted in Q4 2019 by our 92nd consecutive quarter of year-over-year revenue growth and record free cash flow generation. Their continued efforts are vital to keeping our communities connected throughout this public health crisis.”

Mediacom Communications said it has completed the redemption of the entire balance of the $50 million outstanding principal amount of its senior notes due 2021. With the retirement of its public debt, Mediacom is no longer obligated to file quarterly financial statements publicly.

“I am proud to announce the repayment of Mediacom’s last remaining bonds,” Mediacom founder, chairman and CEO Rocco Commisso said in a press release. “Reaching this milestone is a testament to the investment grade quality of Mediacom’s financial position, highlighted by a total debt leverage ratio well below 3x and historically low average borrowing costs of 3.25%. Naturally, none of this would be possible without the hard work and dedication of Mediacom’s 4,500 employees, who have consistently produced excellent results, evidenced by the unique accomplishment of 91 consecutive quarters of year-over-year revenue growth.”

Related: Rocco Wants Privacy 

Mediacom, founded in 1995, filed for an initial public offering in 2000 and was publicly traded for more than a decade. In 2011, the company went private, claiming the public markets weren’t properly valuing cable operators.  Although it was no longer publicly traded, the company did have public debt, which required it to make quarterly filings with the Securities and Exchange Commission. Once that debt is retired, that requirement no longer holds.

Related: Rocco Seals the Deal 

“I would like to extend my sincere appreciation to our long-term bondholders for their support and trust over my 33 years of raising debt capital in the ‘non-investment grade’ markets,” Commisso continued. “I am gratified to have returned the favor by delivering an unblemished credit performance over the decades. Equally important, our banks and institutional term loan investors under the Company’s existing credit facilities continue to benefit from solid asset coverage, ample levels of liquidity and Mediacom’s robust free cash flow generation.”

Mediacom last filed quarterly results in  October -- its Q3 financials -- and reported revenue growth of 3.5% and cash flow growth of nearly 8%. The company said it may continue to issue quarterly press releases, but it is not required to do so.   

MoffettNathanson senior analyst Michael Nathanson wrote in a blog post Wednesday that he expects the Walt Disney Co. to outlast Comcast in the looming battle for 21 Century Fox assets, adding that Disney has more debt capacity to withstand a prolonged fight.

Disney upped its offer for certain 21 Century Fox assets Wednesday, making a cash and stock bid valued at about $71.3 billion. The bid was in response to a $65 billion all-cash offer Comcast made for the assets last week.

Related: Iger: No Chance Disney Would Agree to Carve up Fox Assets 

In the blog post, Nathanson wrote that the higher Disney bid was expected, and he anticipates Comcast will continue with a volley of its own in the coming days. But he said despite some speculation that Comcast needs the Fox assets more and would therefore pay whatever it takes to win them, Disney could have more financial wherewithal.

Related: Disney Sweetens Fox Offer to $70 Billion

Nathanson estimated that even with its higher offer, Disney would be in better shape debt-wise, whether it buys all of U.K. satellite TV operator Sky. According to Nathanson, Disney would need to raise about $35.7 billion in debt to finance a 50-50 cash and stock deal for the Fox assets. Buying the remaining 61% interest in Sky Fox doesn’t already own would tack on another $17.6 billion in debt. But even at that higher level, Disney would only be 2.8 times leveraged at the end of 2020, which Nathanson wrote “would still be a reasonable range without much long-term concern.”

According to Moody’s Investors Service, Comcast would become the second highest leveraged media company in the U.S. (after AT&T-Time Warner) with total debt of about $170 billion, if its all-cash offer for the Fox assets were accepted. Moody’s said Comcast’s leverage ratio would be about 4.25 times cash flow.

Related: Moody's: Comcast-Fox Deal Would Dramatically Increase Leverage

In contrast, Nathanson estimated that Disney’s gross debt would be about $109.6 billion after buying Fox and Sky, with net debt (including cash and cash equivalents from both companies) at about $81.4 billion at the end of 2020

The additional room between Disney’s debt levels and Comcast’s could mean that Disney has more ability to raise its offer.

Related: The Hunt is On

“Disney remains in a strong position to compete with any potential follow-on raised bid from Comcast,” Nathanson wrote. “In our view, Disney has the superior balance sheet, cost of debt, equity and rationale combined with fewer regulatory hurdles to emerge victorious over Comcast in a bidding war. Before, the only outstanding question was whether Disney’s board and management would go to the mat on this transaction? We now know the answer is clearly yes!”