Business Context and Reporting Period
Company: Churchill Downs Incorporated
Filing Type: Form 8-K (Current Report)
Date of Report: December 22, 2009
Event: Entry into a Material Definitive Agreement (Second Amended and Restated Credit Agreement).
Key Financial Metrics and Debt Structure
This filing details a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period. Key debt metrics include:
- Maximum Borrowing Capacity: $275,000,000.
- Facility Components: Includes a letter of credit subfacility up to $20,000,000 and a swing line commitment up to $20,000,000.
- Expansion Option: The Company may increase the aggregate commitment to $375,000,000 subject to Agent consent and specific requirements.
- Maturity Date: December 22, 2013.
- Interest Rates: Floating rate advances bear interest at the highest of the Agent's prime rate, federal funds rate + 0.50%, or Eurodollar Base Rate + 1%, plus an Applicable Margin of 1.00% to 2.50%. Eurodollar advances bear interest at the Eurodollar Base Rate plus an Applicable Margin of 2.00% to 3.50%.
- Commitment Fee: Ranges from 0.30% to 0.50% of the available aggregate commitment, payable quarterly.
Material Changes Versus Prior Period
The new Agreement amends, supersedes, and restates in its entirety the previous Amended and Restated Credit Agreement dated September 23, 2005 (which itself replaced an April 3, 2003 agreement). All loans and secured obligations outstanding under the previous agreements as of December 22, 2009, continue as loans under this new Agreement.
Guidance, Covenants, and Risks
Financial Covenants: The Company must maintain the following ratios:
- Interest Coverage Ratio: Consolidated adjusted EBITDA to consolidated interest expense must be greater than 3.5 to 1.0.
- Leverage Ratio: Consolidated funded indebtedness to consolidated adjusted EBITDA must not exceed 3.25 to 1.0.
- Consolidated Net Worth: Must not be less than $350,000,000 plus 50% of consolidated net income earned in each fiscal year (starting 2009) plus 100% of net proceeds from future debt and equity offerings.
Use of Proceeds: General corporate purposes and acquisition needs.
Risks and Events of Default: Includes failure to pay principal or interest, covenant violations, material misrepresentations, insolvency, defaults on other indebtedness of at least $3,000,000, and change in control. Default may result in immediate acceleration of all obligations.
Investor Verification Checklist
- Verify the Company's current leverage ratio and interest coverage ratio against the new covenants (3.25:1 and 3.5:1, respectively).
- Confirm the amount of outstanding debt carried over from the previous credit agreement.
- Review the specific subsidiaries listed as Guarantors to understand the scope of collateral and liability.
- Monitor the Company's ability to maintain the minimum consolidated net worth of $350,000,000.
- Check for any subsequent filings regarding the utilization of the $275,000,000 facility or the exercise of the expansion option to $375,000,000.