Netflix (NFLX.US) has strengthened its financial position for the potential acquisition of Warner Bros. Discovery (WBD.US) by refinancing part of its $59 billion bridge loan with lower-cost, longer-term debt. According to a filing on Monday, the streaming giant secured a $5 billion revolving credit facility and two delayed-draw term loans of $10 billion each to refinance portions of the bridge loan used for the Warner Bros. bid. This leaves $34 billion still pending syndication.
Netflix reached an agreement in early December valuing Warner Bros.' studio and streaming assets at $82.7 billion. Shortly after, Paramount Skydance (PSKY.US) launched an all-cash hostile takeover bid for Warner Bros., sparking a bidding war that could reshape the entertainment industry regardless of the winner. Both bids involve debt transactions worth tens of billions, ranking among the largest deals of the past decade.
Last week, Warner Bros. advised its shareholders to reject Paramount’s offer in favor of its initial agreement with Netflix. The company labeled Paramount’s $54 billion debt-backed proposal as "inferior and inadequate," citing excessive financing risks.
Despite having the backing of Warner Bros.' board, Netflix faces regulatory and political hurdles in completing the acquisition. Massachusetts Senator Elizabeth Warren has criticized the deal as an "antitrust nightmare," while Netflix has reassured employees that the acquisition would not lead to studio closures.
Bridge loans are typically used to cover immediate financing gaps during acquisition bids and are later replaced by more stable, lower-cost debt spread across multiple lenders. Although short-term, these loans help banks build relationships with companies for future high-fee mandates.
With recent stability in credit markets, banks are fiercely competing for limited opportunities. Wells Fargo, BNP Paribas, and HSBC Holdings are among the lenders providing unsecured bridge loans to Netflix.
The newly announced debt will mature in phases. Assuming the acquisition proceeds smoothly, the revolving credit facility—allowing flexible borrowing and repayment—will mature in 2030 or three years post-deal (whichever comes first). The delayed-draw term loans will mature in two and three years, respectively.
Netflix may further reduce its bridge loan exposure and extend debt maturities by tapping capital markets. Given its A3 rating from Moody’s and A rating from S&P, the company is likely to secure investment-grade debt.
Early in its growth, Netflix relied on junk bonds but gained access to cheaper financing after achieving blue-chip status in 2023.
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