DraftKings Raises $600m of Debt to Buy Back Convertibles That Convert at $70

DraftKings has launched syndication of a $600 million senior secured term loan B, with the proceeds earmarked for buying back part of the $1.15 billion of convertible notes it issued in 2021.

The logic is dilution. Holders of those notes can convert into DraftKings common stock at $70 a share in 2028, more than double where the stock currently trades, so retiring the paper before then removes a claim on equity that would otherwise be exercised. The company said purchases will be made "subject to availability and market conditions" and that proceeds could also go to "other general corporate purposes".

Alongside it, DraftKings has secured commitments for a new $750 million senior secured revolving credit facility maturing in 2031, replacing its existing $500 million revolver that runs to 2029. The new facility is "to enhance liquidity and provide additional financial flexibility", the company said, and it expects the revolver to "remain substantially undrawn at closing".

DraftKings is rated BB+ by Fitch and BB by S&P, both below investment grade. S&P affirmed its rating with a stable outlook on the news, saying the company can carry the additional borrowing without meaningful risk to its credit grade. "We expect DraftKings' credit metrics will have good cushion compared to our downgrade threshold for the rating following its proposed $600 million incremental term loan and proposed $250 million upsize of its revolving credit facility," the agency said, noting DraftKings holds $1.4 billion in accessible cash.