Churchill Downs Incorporated priced a $500 million senior secured term loan on September 17, with an issue price of 99.875% and interest calculated at the Secured Overnight Financing Rate plus 175 basis points. The loan matures in 2033. Proceeds from the borrowing are designated for repaying existing Term Loan B and revolving credit facilities, covering transaction costs, and funding working capital and general corporate purposes.
The company also announced plans to redeem its 5.50% notes due in 2027 using revolver borrowing, with a conditional redemption notice expected approximately 30 days after loan issuance. The refinancing extends the maturity profile compared to existing Term Loan B debt previously due in 2028, providing additional time for cash generation. The new term loan’s credit spread matches the SOFR-plus-175-basis-point pricing of the existing Term Loan B as disclosed in June quarterly filings. While extending maturity without widening spreads provides some benefit, issue discounts and transaction fees affect overall borrowing costs.
The refinancing introduces increased exposure to floating interest rates, as the company transitions from fixed-rate notes to floating-rate revolver borrowing. At June 30, Churchill Downs held $600 million of the 5.50% notes outstanding, representing approximately $33 million in annual coupons. If replaced entirely with unhedged floating-rate debt, each one-percentage-point increase in the benchmark rate would add roughly $6 million annually to interest costs on replacement borrowing, assuming consistent balances and lending margins.
Liquidity considerations require ongoing assessment following both transactions. Revolver availability stood at $861 million as of June 30 after accounting for outstanding letters of credit. The new term loan proceeds could expand available liquidity through debt repayments, while redemption of the existing notes would consume revolver capacity. The completed refinancing structure and actual borrowing costs after fees and any hedging arrangements will determine the overall impact on financial risk. Hedge fund holdings in Churchill Downs declined to 50 funds at the end of the second quarter from 52 funds three months prior.
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