Netflix refinances part of $59 billion loan with cheaper, long-term debt as it seeks to acquire Warner Bros

Streaming giant Netflix Inc has refinanced a portion of its $59 billion bridge loan with cheaper, long-term debt, strengthening the financial support for its bid to acquire Warner Bros. Discovery Inc, according to a report by Bloomberg.

Netflix secured a $5 billion revolving credit line and two $10 billion delayed-draw term loans to refinance part of the bridge facility used for its Warner Bros. bid, as per a Monday filing. This leaves $34 billion available for syndication, the report said.

In early December, Netflix reached an agreement valuing Warner Bros.’ studio and streaming assets at $82.7 billion. Following this, Paramount Skydance Corp. initiated a hostile takeover bid for Warner Bros., igniting a bidding war that is set to transform the entertainment industry, no matter who wins. Both bids involve multibillion-dollar debt arrangements, making them some of the largest deals of the last decade.

Last week, Warner Bros. urged its shareholders to turn down Paramount's bid and stick with their original deal with Netflix. The studio called Paramount’s offer, which involves $54 billion in debt commitments, 'inferior and inadequate,” and expressed concerns that the deal’s financing posed too much risk, the report said.

Even as Netflix has the backing of the Warner Bros board, it encounters regulatory and political challenges to complete the acquisition. Democratic Senator Elizabeth Warren from Massachusetts has called the bid an “anti-monopoly nightmare,” while Netflix has assured employees that there will be no studio closures.

What are bridge loans?

Bridge loans address immediate funding needs and are often utilised by companies making buyout bids. Usually, they are replaced after a few weeks or months by more stable and cost-effective debt, which is often distributed across multiple lenders.

Although short-term, these loans enable banks to develop relationships with companies, paving the way for securing higher-paying mandates in the future. Currently, with credit markets remaining subdued, banks are competing intensely for the limited opportunities that emerge.

Wells Fargo & Co., BNP Paribas SA and HSBC Holdings Plc are among the banks that gave Netflix an unsecured bridge loan.

Details of refinancing

The debt announced on Monday is payable at different times. If the acquisition proceeds, the revolving credit facility, which enables flexible borrowing and repayment, will mature either in 2030 or three years after the completion of the deal, whichever occurs first. The delayed-draw term loans are scheduled to mature in two and three years, respectively, the report said, citing the statement.

Netflix is expected to access capital markets to decrease its bridge loan and prolong debt maturities, it added.

The firm earlier depended on the junk-bond market in its early stages, but in 2023, it secured more affordable financing after being upgraded to blue-chip status.