Stephen Flynn, Bloomberg Intelligence Senior Credit Analyst, discusses the record-breaking bank loan that will help finance Netflix’s planned $72 billion acquisition of Warner Bros. Discovery Inc.
Netflix Inc. has lined up $59 billion of financing from Wall Street banks to help support its planned $72 billion acquisition of Warner Bros. Discovery Inc., which would make it one of the largest ever loans of its kind.
Wells Fargo & Co., BNP Paribas SA and HSBC Plc are providing the unsecured bridge loan, according to a statement and filing on Friday. Such loans are a type of financing that is typically replaced with more permanent debt like corporate bonds.
In this case, those bonds are expected to be rated investment grade since Netflix carries an A3 debt grade by Moody’s Ratings and A by S&P Global Ratings. Netflix relied on the junk-bond market for years in the early days of its business, but was upgraded to blue-chip status in 2023, giving the streaming giant access to cheaper financing and a deeper pool of investors.
A loan of $59 billion would rank among the biggest of its type. Anheuser-Busch InBev SA obtained $75 billion of loans to back its acquisition of SABMiller Plc in 2015, the largest bridge financing on record, according to data compiled by Bloomberg.
Under the deal announced Friday, Warner Bros. shareholders will receive $27.75 a share in cash and stock in Netflix for an enterprise value of about $82.7 billion.
Both banks and investors have been eagerly awaiting the return of mega acquisitions in investment-grade and high-yield rated transactions. In the junk-rated space, JPMorgan Chase & Co. made waves in September by committing $20 billion of financing for the take-private of Electronic Arts Inc., the largest debt commitment ever made by a single bank for a leveraged buyout.
Bridge loans are a crucial step for banks in building relationships with companies to win higher-paying mandates down the road. One or a small group of banks typically provide the initial bridge loan, and then bring in other banks to spread the risk once the acquisition is publicly announced.
Eventually, those loans are replaced with bonds sold to institutional investors. Netflix cast off its junk status in March of 2023, and has been lifted again by both ratings agencies. Adding $59 billion to its debt pile could prompt Moody’s and S&P to reassess their grades.
——–
More on Bloomberg Television and Markets
Like this video? Subscribe and turn on notifications so you don’t miss any videos from Bloomberg Markets & Finance: https://tinyurl.com/ysu5b8a9
Visit http://www.bloomberg.com for business news & analysis, up-to-the-minute market data, features, profiles and more.
Connect with Bloomberg Television on:
X: https://twitter.com/BloombergTV
Facebook: https://www.facebook.com/BloombergTelevision
Instagram: https://www.instagram.com/bloombergtv/
Connect with Bloomberg Business on:
X: https://twitter.com/business
Facebook: https://www.facebook.com/bloombergbusiness
Instagram: https://www.instagram.com/bloombergbusiness/
TikTok: https://www.tiktok.com/@bloombergbusiness?lang=en
Reddit: https://www.reddit.com/r/bloomberg/
LinkedIn: https://www.linkedin.com/company/bloomberg-news/
More from Bloomberg:
Bloomberg Radio: https://twitter.com/BloombergRadio
Bloomberg Surveillance: https://twitter.com/bsurveillance
Bloomberg Politics: https://twitter.com/bpolitics
Bloomberg Originals: https://twitter.com/bbgoriginals
Watch more on YouTube:
Bloomberg Technology: https://www.youtube.com/@BloombergTechnology
Bloomberg Originals: https://www.youtube.com/@business
Bloomberg Quicktake: https://www.youtube.com/@BloombergQuicktake
Bloomberg Espanol: https://www.youtube.com/@bloomberg_espanol
Bloomberg Podcasts: https://www.youtube.com/@BloombergPodcasts
