Netflix takes out $100 million credit line

PHYSICAL: Will use it for working capital, possible buybacksWill use it for working capital, possible buybacks

By Danny King -- Video Business, 9/24/2009

SEPT. 24 | PHYSICAL: Netflix has obtained a $100 million credit line with Wells Fargo, as the largest U.S. movie-rental company looks to take advantage of loosening credit markets by raising cash for investment and possible stock buybacks.

The loan has an interest rate of about 4% and is due September 2012, Netflix said in a Securities and Exchange Commission filing earlier this week.

The company has been boosting its investment in its videostreaming service by obtaining rights for a broader range of titles—about 17,000 of its 100,000 titles are available in digital form—while reaching agreements with more makers of electronic components that can play the titles on televisions.

Unlike competitor Blockbuster, debt has never been an issue with Netflix, which had no long-term debt as of June 30. Blockbuster has had to reduce costs all year in order to cut its debt to comply with its new $250 million refinancing agreement. Finalized May 11, the agreement extended a line of credit more than a year past its previous due date of August 2009 but was for about $100 million less than the previous agreement.

Blockbuster and Redbox parent Coinstar said earlier this month that they would be looking to raise more than a half-billion dollars in combined debt, indicating that the largest U.S. movie-rental chain and biggest movie-rental kiosk operator believe that the credit markets have loosened enough for them to lower their interest expenses by replacing existing financing.

Late last week, Blockbuster said it doubled the size of its debt offering to as much as $675 million, with an interest rate of almost 12%.