Churchill Downs Incorporated priced a $500 million senior secured term loan on September 17, carrying interest at the Secured Overnight Financing Rate plus 175 basis points, with an issue price of 99.875%. The company intends to use the proceeds to repay existing Term Loan B and revolving loans, cover transaction costs, and support working capital and general corporate purposes.
The company also plans to redeem its 5.50% notes due in 2027 using revolver borrowing, with a conditional redemption notice targeted for 30 days after issuance. The new financing extends the maturity profile by replacing the existing Term Loan B, which was due in 2028, with debt due in 2033, providing additional time for cash generation. The credit spread on the new loan matches the SOFR-plus-175-basis-point pricing of the existing Term Loan B disclosed in the June-quarter filing, though issue discounts and transaction fees affect overall borrowing costs.
The refinancing introduces increased interest rate exposure as fixed-rate notes are replaced with floating-rate borrowing. At June 30, Churchill Downs had $600 million of the 5.50% notes outstanding, representing $33 million in annual coupons. If replaced entirely with unhedged floating-rate borrowing, each one-percentage-point increase in the benchmark would add approximately $6 million to annual interest on the replacement debt. The revolver carried SOFR plus 160 basis points in margin as of June, and at a 3.90% benchmark rate would produce a stated borrowing rate equal to the notes’ 5.50% coupon before fees and hedging.
The refinancing’s impact on financial risk will depend on the completed repayment schedule, borrowing costs after fees and hedging, and remaining revolver capacity. As of June 30, revolver availability was $861 million after outstanding letters of credit. Repayments funded by the new term loan could increase liquidity capacity, while borrowing for the note redemption would offset those gains. Hedge fund holdings in Churchill Downs decreased to 50 funds at the end of the second quarter from 52 funds three months earlier.
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