DraftKings Secures $500 Million Credit Line from a Financial Consortium Led by Morgan Stanley
In a significant move, DraftKings, the popular online sports betting and daily fantasy sports platform, has secured a new credit facility worth up to $600 million. This new facility, replacing a previous one worth $125 million from Banc of California and Citizens Bank, offers DraftKings greater liquidity to support its diversification efforts and operations.
The new credit facility, provided by a syndicate fronted by Morgan Stanley, provides DraftKings with a cheaper way to borrow compared to the previous one. The new rate with the new credit facility is around 7.07%, compared to the previous rate of Prime Rate plus 1%. This difference, at current interest rates, is likely to be over a percentage point.
DraftKings plans to use the proceeds from this new facility for general corporate purposes, rather than specifying targeted investment or expansion projects. No other specific investment or expansion plans tied directly to the credit facility have been publicly detailed.
In addition to this credit facility, DraftKings is launching a $10 million national Responsible Gaming advertising campaign. This campaign leverages NFL and NBA branding to promote responsible gaming practices during NCAA basketball tournaments.
CEO Jason Robins has confirmed that DraftKings would explore opening a prediction market, as part of the company's diversification efforts. The exploration of a prediction market by DraftKings is planned before the next US presidential election. DraftKings has already launched its player vs player poker games in a second state this year, further diversifying its offerings.
The new credit facility does not specify its term length, allowing DraftKings greater flexibility in its operations. The facility matures in March 2032 and carries an interest rate of SOFR plus 1.75% per annum.
The former credit line has been closed and fully replaced with the new one. The new credit facility is expected to provide DraftKings with greater liquidity and flexibility in its operations.
In conclusion, DraftKings' new credit facility provides the company with a cheaper way to borrow, greater liquidity, and flexibility, all of which will support its ongoing diversification efforts. The company's Responsible Gaming campaign underscores its commitment to promoting safe and responsible gaming practices.
The new credit facility, initiated by Morgan Stanley, provides DraftKings a cheaper method for financing compared to the previous one, with an interest rate of 7.07%, a significant decrease from the previous rate of Prime Rate plus 1%. With this new facility, DraftKings can leverage technology to strengthen their financial position, allowing for further expansion and innovation in various sectors.
