Netflix Inc. is expected to price its latest debt offering later Wednesday, a $2 billion offering of junk bonds that comes at a risky time for the streaming giant.

Netflix NFLX, -4.18% is burning through cash at a fast pace and its outlook is less certain, given the pending competition from two major new entrants to the streaming market, Disney Co. DIS, -3.08% and Apple Inc. AAPL, -4.19%

“We are concerned a misstep in its growth trajectory, while cash burn continues to mount, could result in material downside for Netflix bonds,” CreditSights analysts Mary Pollock and Jay Mayers wrote in a commentary. “Investors looking at the new issue need to consider this scenario, in our view.”

Netflix is expected to issue notes with a maturity of 10.5 years denominated in dollars and euros, according to CreditSights. The deal comes after a better-than-expected first-quarter earnings report that was overshadowed by below-consensus guidance for the second quarter.

The company also increased guidance for free cash flow burn in 2019 to $3.5 billion, as it continues to spend billions on content. That forecast spooked some investors who worry that any encroachment on the company’s subscriber base, the main source of its revenue, could upend its entire business model.

“We see Netflix holding a valuable position in the over-the-top ecosystem and expect that it will retain this position over the long term,” said the CreditSights analysts. “However, over the near term, we believe that the impact of new competitors in the space is real.”

A survey released early Wednesday found 14.5% of subscribers, equal to 8.7 million people, may drop Netflix in favor of the $6.99-a-month service coming from Disney in November, costing Netflix about $117 million in lost revenue a month.

The study, conducted by research company Streaming Observer and Mindnet Analytics, polled just 602 current Netflix subscribers, but predictably found parents of young children especially likely to take Disney over Netflix, given the wealth of family-friendly films and TV programs on offer.

Netflix Founder and Chief Executive Reed Hastings played down the threat of competition on the company’s most recent earnings call.

“Disney and Apple add a little bit more, but frankly I doubt it will be material because again there’s already so many competitors for entertainment time,” Hastings said on the company’s video interview.

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“We expect that any impact to subscriber growth from these launches (Disney, AT&T/Time Warner,Comcast/NBCU/Sky) could weigh heavily on Netflix’s equity price, and in turn its bonds,” said CreditSights. “Netflix needs to balance competitive risk with improvement in its cash profile in our view.”

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The U.S. dollar tranche would offer value at a range of 25 basis points to 35 basis points wide of the existing 6.375% notes that mature in 2029, the analysts wrote. Those notes last traded at 108.341 cents on the dollar to yield 5.294%, according to MarketAxess.

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The current yield-to-worst on those notes is about 5.3%, said CreditSights, implying a new issue yield of about 5.6%. That would put the new notes roughly in line with SoftBank’s 6.25% notes that mature in 2028.

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“Clearly, Netflix and SoftBank 9984, -4.51% are not perfect comparisons, but share in a disrupter-tech focus and have relied heavily on open debt capital markets to finance their significant investments,” they wrote.

The euro tranche would offer fair value wide to the outstanding notes that mature in 2029 that are yielding about 3.6%. That would mean a new issue yield of about 3.9%.

If the company issues the full $2.0 billion planned, it would raise its debt level to $12.4 billion, raising pro forma leverage to 6.0 times, or nine ticks higher from quarter end and eight ticks higher than year-end. It would mark a record high gross leverage figures for the company, said CreditSights.

For more, read: Netflix stock falls again as analysts take a bullish tone despite downbeat guidance

Netflix shares were down 1.1% Wednesday, but have gained 41% in 2019 to date. Disney was up 0.5% and has gained 22% in the year so far. The Dow Jones Industrial Average DJIA, -1.92% , which counts Disney as a member, has gained 14% in the year, while the S&P 500 SPX, -2.37% has gained 17%.

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