Churchill Downs Inc. 8-K Summary
Business Context and Reporting Period
This Form 8-K, dated December 27, 2017, reports material definitive agreements and the creation of direct financial obligations by Churchill Downs Incorporated (CDI). The filing details the execution of a new private offering of senior notes and the closing of a senior secured credit facility.
Key Financial Metrics and Debt Structure
The filing outlines the following capital market transactions:
- Senior Notes: Issued $500 million in aggregate principal amount of 4.75% senior notes due 2028.
- Term Loan B: Closed a $400 million senior secured term loan B due 2024, bearing interest at LIBOR plus 200 basis points.
- Revolving Credit Facility: Established a $700 million senior secured revolving credit facility due 2022. This includes a $50 million letter of credit sub-facility and a $50 million swing line commitment.
- Collateral: The Senior Secured Credit Facility is secured by substantially all assets of the Borrower and Guarantors.
The filing text does not provide specific values for revenue, profit, cash flow, margins, or existing liquidity positions outside of the new debt instruments described.
Material Changes and Covenants
The new Indenture and Credit Agreement introduce significant covenants and restrictions, including:
- Limits on incurring additional debt and issuing preferred stock.
- Restrictions on paying dividends, making restricted payments, and certain investments.
- Constraints on creating liens and selling assets.
- Change of control provisions requiring an offer to purchase the Notes at 101% of principal plus accrued interest.
Outlook, Risks, and Unusual Items
Redemption Terms: CDI may redeem the Notes prior to January 15, 2023, at 100% of principal plus a make-whole premium. Prior to January 15, 2021, CDI may redeem up to 40% of the Notes at 104.750% of principal using proceeds from equity offerings.
Events of Default: The Indenture includes customary events of default such as nonpayment of principal or interest, breach of agreements, failure to pay other indebtedness, and bankruptcy events. If triggered, holders of at least 30% of the Notes may declare the entire series due and payable.
Registration Rights: A Registration Rights Agreement was entered into to register the Notes for resale under the Securities Act if they are not freely tradable 366 days from the issuance date.
Investor Verification Checklist
- Verify the total leverage ratio impact of the new $1.6 billion in debt ($500M Notes + $400M Term Loan + $700M Revolver capacity).
- Review the specific "make-whole" premium calculation methodology in the Indenture (Exhibit 4.1).
- Confirm the current utilization of the $700 million Revolver and the status of the $50 million letter of credit sub-facility.
- Assess the impact of the new covenants on CDI's ability to pay dividends or make future acquisitions.
- Examine the list of Guarantors under the Credit Agreement to understand the scope of secured assets.