Churchill Downs Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Churchill Downs Incorporated ("CDI") on December 15, 2015. The filing reports the entry into a material definitive agreement involving the issuance of additional senior notes.
Key Financial Metrics and Debt Structure
- Debt Issuance: CDI issued an additional $300.0 million in aggregate principal amount of 5.375% senior notes due 2021.
- Issue Price: The notes were issued at 101.000% of the principal amount.
- Interest Payments: Semiannual payments on June 15 and December 15, commencing June 15, 2016.
- Guarantees: The notes are senior unsecured obligations guaranteed by CDI's domestic subsidiaries that guarantee its senior secured credit facility.
- Use of Proceeds: Net proceeds will be used to repay a portion of outstanding borrowings and accrued interest under the senior secured credit facility, pay the anticipated earn-out obligation for the Big Fish Games, Inc. acquisition (due March 2016), and cover related fees and expenses.
Material Changes and Covenant Restrictions
The issuance of these notes is governed by a First Supplemental Indenture which imposes significant covenants limiting CDI's ability to:
- Incur additional debt or issue preferred stock.
- Pay dividends or make other restricted payments.
- Make certain investments or create liens.
- Sell assets or merge/consolidate with other entities.
- Enter into transactions with affiliates.
Redemption Terms: CDI may redeem the notes prior to December 15, 2016, at 100% of principal plus a make-whole premium. On or after that date, redemption prices are set forth in the Indenture. CDI may also redeem up to 35% of the aggregate principal amount prior to December 15, 2016, at 105.375% of principal using proceeds from equity offerings.
Outlook, Risks, and Contingencies
- Change of Control: In the event of a change of control triggering event, CDI must offer to purchase the notes at 101% of principal plus accrued interest.
- Events of Default: Include nonpayment of principal or interest, breach of agreements, failure to pay other indebtedness, and bankruptcy/insolvency. Upon default, holders of at least 30% of the notes may declare the entire amount due immediately.
- 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 after issuance.
Investor Verification Checklist
- Verify the exact amount of debt repaid from the senior secured credit facility using the net proceeds.
- Confirm the status and amount of the Big Fish Games, Inc. earn-out obligation due in March 2016.
- Review the First Supplemental Indenture (Exhibit 4.1) for specific definitions of "Change of Control" and "Make-Whole Premium."
- Assess the impact of the new covenants on CDI's ability to pay dividends or pursue future acquisitions.