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Netflix High Yield Bonds Slump In Trading On Weaker-Than-Expected Subscriber Growth

Bonds backing Netflix slipped a couple of points on weaker-than-expected subscriber growth for the third quarter before retracing some of the losses. The Internet television company’s 5.375% notes due 2021 and 5.75% notes due 2024 both fell two points to 100.50/101.50, but are now quoted at 101.50/102.50 and 101/102, respectively, according to sources and trade data. Netflix’s share price is down 24% this morning.

Netflix said it added a million new members in the U.S in the third quarter, which was lower than the 1.33 million forecast and below the 1.29 million added in the prior year. Two million members were added internationally in the past quarter, which again was lower than the roughly 2.4 million forecast, but higher than the prior year of 1.44 million. Netflix said the primary cause of lower additions was likely the higher prices compared to a year ago.

Total revenue for the quarter was $1.22 billion, in line with expectations and up 38% from the same period a year ago, while net income was $59 million, up 86% from the third quarter 2013. Fourth quarter estimates are for $1.31 billion in revenue and $27 million in net income.

The company expects to add another four million members in the fourth quarter, breaking down to 1.85 million U.S. additions and 2.15 million international, to reach over 57 million global members.

The 5.75% notes due 2024 were Neflix’s last tap of the market, pricing in February at par, via Morgan Stanley left lead. Proceeds from that issue, rated BB-/Ba3, were used to support general corporate purposes.

Netflix was founded in 1997 and is headquartered in Los Gatos, California. It trades on the Nasdaq under the symbol NFLX.

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