DraftKings Secures $600 Million Term Loan B
DraftKings has finalized a $600 million Term Loan B credit facility, surpassing its initial $500 million target due to robust investor interest. Announced last week, the upsized loan carries an interest rate of SOFR plus 1.75% annually and matures in March 2032.
Loan Details and Flexibility
Originally pegged at $500 million, the Term Loan B grew by $100 million amid high demand from lenders. DraftKings will repay 1% of the principal annually, keeping obligations manageable through its 2032 deadline.
CEO Jason Robins highlighted the loan’s flexibility, stating, “We’ll consider how we want to use it.” He added that if the right moment arises, “we could potentially accelerate some of the buybacks,” hinting at possible stock repurchasing down the line.
The terms, SOFR plus 1.75%, reflect a competitive rate, signaling market confidence in DraftKings’ financial health. With no pressing cash needs, this move doubles as a strategic play to test the waters of debt financing.
A Toe in the Debt Pool
Robins credited CFO Alan Ellingson for pushing the company to explore this avenue. “Alan convicted me to dip a toe in the debt markets,” Robins said, despite there being no “immediate need for cash.”
The goal is to familiarize lenders with DraftKings and build comfort with its business model. “It was more about getting our feet wet in the debt markets, getting lenders used to us and getting them comfortable with us,” he explained.
The market’s response exceeded expectations. “We were very pleasantly surprised in many ways with the reception we got,” Robins noted, underscoring the warm welcome from investors. This positive uptake could pave the way for future financings as DraftKings grows.
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