8-KMaterial AgreementsFinancial EventsSecurities & Listing+2

NETFLIX INC 8-K Report, Material Agreement (Nov 28, 2011)

Filed November 28, 2011For Securities:NFLX

Summary

Netflix, Inc. (NFLX) filed an 8-K on November 28, 2011, reporting the completion of a material definitive agreement. The company issued $200 million in aggregate principal amount of Zero Coupon Senior Convertible Notes due 2018 to investment funds affiliated with Technology Crossover Ventures (TCV). These notes are general, unsecured obligations, effectively subordinated to secured debt, and structurally subordinated to subsidiary liabilities. They do not bear interest unless specific circumstances arise and mature in December 2018, subject to earlier conversion or repurchase. The initial conversion price is approximately $85.80 per share of common stock. The filing also details a Registration Rights Agreement with TCV, obligating Netflix to file a shelf registration statement for the resale of shares issuable upon conversion of the notes. This transaction was conducted as a private placement under Section 4(2) of the Securities Act, exempt from registration. The issuance of these notes could impact future share dilution and debt covenants, with specific provisions for repurchase upon a change of control and potential mandatory conversion under certain stock price performance conditions.

Key Highlights

  • 1Netflix completed the issuance of $200 million in Zero Coupon Senior Convertible Notes due 2018 to Technology Crossover Ventures (TCV).
  • 2The notes are convertible into Netflix common stock at an initial conversion price of approximately $85.80 per share.
  • 3The notes are unsecured and subordinate to secured debt and subsidiary liabilities.
  • 4A Change of Control event triggers a mandatory repurchase right for noteholders at 120% of the principal amount.
  • 5The company may elect to convert the notes into stock if certain stock price and trading volume conditions are met for a sustained period.
  • 6A Registration Rights Agreement was entered into, requiring Netflix to register shares issuable upon conversion for resale by TCV.
  • 7The transaction was a private placement, exempt from standard registration requirements under the Securities Act.

Frequently Asked Questions

This 8-K filing announces the completion of a material definitive agreement, specifically the issuance of $200 million in Senior Convertible Notes due 2018 to Technology Crossover Ventures (TCV). It also covers related agreements such as the Indenture and a Registration Rights Agreement.

The notes have a principal amount of $200 million, mature on December 1, 2018, and are zero coupon, meaning they do not bear regular interest. They are convertible into Netflix common stock at an initial price of approximately $85.80 per share. The notes are general, unsecured obligations.

Upon a 'Change of Control' as defined in the indenture, noteholders have the right to require Netflix to repurchase their notes at 120% of the principal amount in cash. This provides a downside protection mechanism for investors in such a scenario.

Netflix can elect to convert the notes into common stock if the average daily trading price of its common stock is at least 130% of the applicable conversion price for at least 50 trading days within a 65-trading day period. This allows Netflix to deleverage its balance sheet if its stock performs well.