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DraftKings(DKNG) - 2024 Q3 - Quarterly Results
DKNGDraftKings(DKNG)2024-11-08 11:45

Credit Agreement and Facility Details - DraftKings Inc. has entered into a Credit Agreement for a senior secured revolving credit facility of 500million[13]−TheproceedsfromtheRevolvingFacilityLoans,SwinglineLoans,andLettersofCreditwillbeusedforworkingcapital,generalcorporatepurposes,andPermittedBusinessAcquisitions[13]−ThecompanyplanstorepayallindebtednessundertheExistingCreditAgreementdatedDecember20,2022,andterminateallcommitmentsrelatedtoit[13]−TheTransactionsincludetheestablishmentoftheRevolvingCreditFacility,repaymentofexistingdebt,andterminationofguaranteesandliensundertheExistingCreditAgreement[13]−TheCreditAgreementinvolvesmultipleentitiesincludingDraftKingsInc.,DKCrownHoldingsInc.,GoldenNuggetOnlineGaming,Inc.,andJackpocketLLCasBorrowers[12]−MorganStanleySeniorFunding,Inc.servesastheAdministrativeAgentandCollateralAgentfortheLendersandSecuredParties[12]−TheAgreementincludesprovisionsfortheissuanceofLettersofCredit,SwinglineLoans,andthefundingofBorrowings[3]−TheAgreementoutlinesconditionsforlending,includingfinancialstatements,compliancewithlaws,andmaintainingrecords[5]−TheAgreementspecifieseventsofdefault,includingfailuretomeetfinancialcovenantsandbreachesofrepresentationsandwarranties[6]−TheAgreementincludesdetailedschedulesandexhibits,suchasformsforBorrowingRequests,ComplianceCertificates,andU.S.TaxComplianceCertificates[9]−TheClosingDatefortheRevolvingCreditFacilityissetforNovember7,2024[70]−ClosingDateRefinancinginvolvesrepaymentordischargeofIndebtednessundertheExistingCreditAgreement[72]FinancialTermsandRates−ABR(AlternateBaseRate)isdefinedasthehighestof(a)FederalFundsEffectiveRateplus0.50500 million[13] - The proceeds from the Revolving Facility Loans, Swingline Loans, and Letters of Credit will be used for working capital, general corporate purposes, and Permitted Business Acquisitions[13] - The company plans to repay all indebtedness under the Existing Credit Agreement dated December 20, 2022, and terminate all commitments related to it[13] - The Transactions include the establishment of the Revolving Credit Facility, repayment of existing debt, and termination of guarantees and liens under the Existing Credit Agreement[13] - The Credit Agreement involves multiple entities including DraftKings Inc., DK Crown Holdings Inc., Golden Nugget Online Gaming, Inc., and Jackpocket LLC as Borrowers[12] - Morgan Stanley Senior Funding, Inc. serves as the Administrative Agent and Collateral Agent for the Lenders and Secured Parties[12] - The Agreement includes provisions for the issuance of Letters of Credit, Swingline Loans, and the funding of Borrowings[3] - The Agreement outlines conditions for lending, including financial statements, compliance with laws, and maintaining records[5] - The Agreement specifies events of default, including failure to meet financial covenants and breaches of representations and warranties[6] - The Agreement includes detailed schedules and exhibits, such as forms for Borrowing Requests, Compliance Certificates, and U.S. Tax Compliance Certificates[9] - The Closing Date for the Revolving Credit Facility is set for November 7, 2024[70] - Closing Date Refinancing involves repayment or discharge of Indebtedness under the Existing Credit Agreement[72] Financial Terms and Rates - ABR (Alternate Base Rate) is defined as the highest of (a) Federal Funds Effective Rate plus 0.50%, (b) Prime Rate, or (c) Term SOFR Rate for a one-month Interest Period plus 1.00%[14] - Applicable Commitment Fee is 0.375% per annum until the first Adjustment Date, then adjusted based on Net First Lien Leverage Ratio[21] - Applicable Margin for Revolving Facility Loans is 2.25% for Term SOFR Loans and 1.25% for ABR Loans until the first Adjustment Date[25] - Net First Lien Leverage Ratio greater than or equal to 2.00:1.00 results in an Applicable Commitment Fee of 0.375%[22] - Net First Lien Leverage Ratio less than 2.00:1.00 results in an Applicable Commitment Fee of 0.250%[22] - Applicable Margin for Term SOFR Loans is 2.25% when Net First Lien Leverage Ratio is greater than or equal to 2.00:1.00[26] - Applicable Margin for ABR Loans is 1.25% when Net First Lien Leverage Ratio is greater than or equal to 2.00:1.00[26] - Applicable Margin for Term SOFR Loans decreases to 1.75% when Net First Lien Leverage Ratio is less than 1.50:1.00[26] - Applicable Margin for ABR Loans decreases to 0.75% when Net First Lien Leverage Ratio is less than 1.50:1.00[26] - Changes in Applicable Margin and Commitment Fee are effective three Business Days after financial statements and Compliance Certificate are delivered[26] - The "Floor" for ABR is set at a rate of interest equal to 1.00% per annum, and for Term SOFR, it is set at 0.00% per annum[144] Benchmark and Interest Rate Adjustments - Benchmark Replacement is defined as the sum of an alternate benchmark rate selected by the Administrative Agent and the Borrower, considering market conventions and governmental recommendations, with adjustments not increasing the Applicable Margin[40] - Benchmark Replacement Adjustment involves a spread adjustment or method for calculating it, selected by the Administrative Agent and Borrowers, considering governmental recommendations and market conventions[41] - Benchmark Replacement Conforming Changes include technical, administrative, or operational changes to reflect the adoption and implementation of a Benchmark Replacement, decided by the Administrative Agent[42] - Benchmark Replacement Date is the earliest occurrence of specific events related to the cessation or non-representativeness of the current Benchmark[44] - Benchmark Transition Event refers to the occurrence of events such as the cessation of Benchmark provision by its administrator or regulatory supervisor, or the announcement of its non-representativeness[46][48] - Benchmark Unavailability Period is the period during which no Benchmark Replacement has replaced the current Benchmark for all purposes under the Loan Documents[50] Borrowing and Loan Details - Borrowing Minimum for TermSOFR Loans is 1,000,000, for ABR Loans is 1,000,000,andforSwinglineLoansis1,000,000, and for Swingline Loans is 250,000[55] - Borrowing Multiple for TermSOFR Loans is 500,000,forABRLoansis500,000, for ABR Loans is 250,000, and for Swingline Loans is 250,000[56]−BusinessDayexcludesweekendsandholidaysinNewYorkCity,andforTermSOFRLoans,alsoexcludesdaysthatarenotU.S.GovernmentSecuritiesBusinessDays[58]−InterestPeriodforTermSOFRBorrowingcanbe1,3,6,or12months,dependingonlenderavailabilityandAdministrativeAgentagreement[190]−InterestPaymentDateforTermSOFRLoansincludesthelastdayoftheInterestPeriodanddatesofrefinancingorconversion[188]FinancialMetricsandRatios−ConsolidatedNetIncomeexcludesnon−cashcompensationcharges,non−cashcostsfromstockoptionplans,andothernon−cashexpenses[80]−CumulativeCreditincludesthegreaterof250,000[56] - Business Day excludes weekends and holidays in New York City, and for Term SOFR Loans, also excludes days that are not U.S. Government Securities Business Days[58] - Interest Period for TermSOFR Borrowing can be 1, 3, 6, or 12 months, depending on lender availability and Administrative Agent agreement[190] - Interest Payment Date for TermSOFR Loans includes the last day of the Interest Period and dates of refinancing or conversion[188] Financial Metrics and Ratios - Consolidated Net Income excludes non-cash compensation charges, non-cash costs from stock option plans, and other non-cash expenses[80] - Cumulative Credit includes the greater of 150 million or 50% of EBITDA for the most recent Test Period[85] - Consolidated Debt includes aggregate principal amounts of Indebtedness under paragraphs (a), (b), (e), and (j), excluding undrawn letters of credit or bank guarantees[78] - Interest Coverage Ratio is calculated as the ratio of EBITDA to Cash Interest Expense for the most recent Test Period[185] - Interest Expense includes gross interest expense, capitalized interest, and excludes certain non-cash items and amortization[187] - The Net First Lien Leverage Ratio must not exceed 4.00 to 1.00 for Incremental Loans or Incremental Equivalent Debt secured by Other First Liens, or 5.00 to 1.00 for those secured by Junior Liens[167] - The Net Total Leverage Ratio must not exceed 5.00 to 1.00 for unsecured Incremental Loans or Incremental Equivalent Debt, or the Interest Coverage Ratio must be at least 2.00 to 1.00[167] - The aggregate principal amount of all Incremental Equivalent Debt on any date of incurrence must not exceed the Incremental Amount, together with any outstanding Incremental Revolving Facilities and/or Incremental Term Facilities[170] - The Inside Maturity Date Debt must not exceed the greater of 90,000,000or30.090,000,000 or 30.0% of EBITDA calculated on a Pro Forma Basis for the most recently ended Test Period[183] Collateral and Security - Collateral Agent is designated as Morgan Stanley Senior Funding, Inc.[75] - Letter of credit rights with a value less than 5,000,000 in the aggregate are excluded from collateral[123] - Commercial Tort Claims with damages claimed less than 5,000,000intheaggregateareexcludedfromcollateral[123]−EquityInterestsorIndebtednesswithexcessivecostoradversetaxconsequencesareexcludedfromcollateral[125]−Morethan65.05,000,000 in the aggregate are excluded from collateral[123] - Equity Interests or Indebtedness with excessive cost or adverse tax consequences are excluded from collateral[125] - More than 65.0% of the issued and outstanding Equity Interests of certain Subsidiaries are excluded from collateral[125] - Subsidiaries primarily holding player deposits, reserves, or winnings and/or Gaming Licenses are excluded from collateral[128] - Swap Obligations that become illegal under the Commodity Exchange Act are excluded from collateral[129] Legal and Regulatory Compliance - Change in Law includes compliance with Dodd-Frank Act, Basel II, III, and IV, and other regulatory directives[68] - Data Privacy Laws encompass all Applicable Laws related to the transmission, storage, security, or protection of data and information[92] - Debtor Relief Laws include the U.S. Bankruptcy Code and other similar laws related to debtor relief or corporate insolvency[93] - Environmental laws cover regulations related to the environment, hazardous materials, and public health and safety[111] - Gaming Authority refers to any Governmental Authority with regulatory control over Gaming activities[151] - Gaming Licenses include any permits, licenses, or authorizations issued by a Gaming Authority to Parent or its Affiliates[154] Miscellaneous Definitions and Provisions - Change in Control occurs if a Person or group acquires more than 40.0% of the voting power of Parent's Voting Stock, or if Parent fails to own 100% of the Equity Interests of any other Borrower[66] - Defaulting Lender is defined as a Lender that fails to fund Loans or meet other obligations, subject to specific conditions and exclusions[96] - Designated Non-Cash Consideration refers to the fair market value of non-cash consideration received in Asset Sales, less cash equivalents received in subsequent dispositions[97] - Disqualified Stock includes Equity Interests that are mandatorily redeemable, redeemable at the holder's option, or provide for scheduled cash dividends[100] - EBITDA for Parent and Subsidiaries is calculated as Consolidated Net Income plus specified adjustments, excluding certain items[102] - Provision for taxes includes state, franchise, gross receipts, margins, and foreign withholding taxes, with penalties and interest related to tax examinations[104] - Depreciation and amortization expenses cover intangible assets, deferred financing fees, and pension-related amortization[104] - Business optimization expenses include restructuring charges, inventory optimization, facility closures, and acquisition-related costs[104] - Non-cash charges are treated as cash charges in subsequent periods when cash disbursements are made[104] - Expenses related to equity issuance, acquisitions, and debt modifications are included, even if the transactions are not successful[104] - Costs from management equity plans, stock options, and employee benefit plans are included if funded with cash proceeds from equity issuance[104] - Losses from new projects are included for 12 months post-completion, provided they are certified by a Responsible Officer[106] - Joint venture EBITDA is included proportionally based on the company's share in the joint venture[106] - Fantasy Sports Contests are defined as activities where winning outcomes reflect knowledge and skill[138] - Federal Funds Effective Rate is defined as the weighted average of overnight Federal funds transactions[141] - A "Foreign Lender" is defined as any Lender that is not a "United States Person" as defined by Section 7701(a)(30) of the Code[145] - "Fronting Exposure" refers to the exposure of a Defaulting Lender's Revolving Facility Percentage of Revolving L/C Exposure and Swingline Loans[146] - "FSHCO" refers to any Subsidiary of Parent that holds Equity Interests in one or more Foreign Subsidiaries or other FSHCOs[147] - "GAAP" refers to the generally accepted accounting principles in the United States, with provisions for amendments in case of material changes required by Governmental Authorities[148] - "Gaming" includes various forms of games and related services, whether played for real money, virtual currency, or for free[149] - "Gaming Business" encompasses the research, design, development, marketing, and operation of Gaming products and services[152] - "Immaterial Subsidiary" is defined as any Subsidiary with revenue less than 5.0% of the consolidated revenues of Parent and its Subsidiaries[164] - The excess of EBITDA calculated on a Pro Forma Basis for the most recently ended Test Period over the aggregate outstanding principal amount of Incremental Term Loans and Incremental Revolving Facility Commitments is capped at 300,000,000 or 100.0% of EBITDA, whichever is greater[167] - Letter of Credit Sublimit on the Closing Date is $125,000,000[199] - Issuing Bank Fees are defined in Section 2.12(b) and relate to the issuance of Letters of Credit[193] - Lien includes mortgages, pledges, security interests, and similar encumbrances, but excludes operating leases and sale agreements[200] - Investment is defined in Section 6.04 and relates to financial commitments or acquisitions[191]