Churchill Downs Inc., the operator of the Kentucky Derby, is turning to the loan market to refinance debt as the company reshapes its portfolio around horse racing, gaming and online betting while seeking to manage borrowing costs and reduce leverage.
The Louisville-based company has been preparing to refinance near-term debt maturities and its existing credit facility, according to management. The move comes after Churchill Downs reported record second-quarter results but also outlined a strategy to sell several regional gaming properties and use proceeds to strengthen its balance sheet.
Churchill Downs is best known for its namesake racetrack and the Kentucky Derby, but the company has grown into a diversified gaming and entertainment business. Its portfolio includes racetracks, historical racing machine venues, casinos and TwinSpires, its online horse-racing wagering operation. Management has recently signaled that the Kentucky Derby, historical racing machine businesses and TwinSpires will form the core of the company going forward.
The refinancing effort arrives as corporate borrowers face a more challenging interest-rate environment. The 10-year US Treasury yield has moved close to 5% in recent months, increasing the benchmark cost of borrowing across corporate credit markets. For a company carrying billions of dollars of debt, refinancing maturities in a higher-rate environment can materially affect future interest expenses even when operating performance remains strong.
Churchill Downs ended the second quarter with long-term debt of about $4.11 billion, according to market data. At the end of June, management reported bank-covenant net leverage of roughly 3.7 times. The company expects leverage to remain around 3.6 to 3.8 times through the end of 2026 before declining in 2027 as cash flow improves and asset sales are completed.
The company’s operating performance provides an important backdrop to the refinancing. Churchill Downs generated record second-quarter net revenue of $980 million and adjusted EBITDA of $477 million, marking its sixth consecutive record second quarter for both measures. The Kentucky Derby itself contributed to stronger results at Churchill Downs Racetrack, while gaming operations continued to provide recurring cash flow.
Management is simultaneously pursuing a narrower portfolio. Churchill Downs has said it plans to sell nine properties and use the proceeds to significantly reduce leverage, reinvest in the flagship racetrack and fund selected high-return projects. That strategy could make the company less dependent on debt over time, although the timing and value achieved from asset sales will determine how quickly leverage actually falls.
The company is also continuing to spend heavily on its most important assets. A $285 million Victory Run development at Churchill Downs Racetrack is scheduled to be completed before the 2028 Kentucky Derby. Management expects Derby week to generate an additional $15 million to $18 million of adjusted EBITDA in 2026 compared with the previous year, underscoring the importance of the event to the company’s financial strategy.
Beyond the Derby, Churchill Downs is expanding its historical racing machine operations and preparing for the mid-2027 opening of Rockingham Grand Casino in New Hampshire. It is also pursuing additional opportunities in Kentucky and Virginia while continuing to develop TwinSpires. Those investments require capital at the same time that the company is trying to lower leverage, making access to reasonably priced financing particularly important.
The refinancing therefore represents more than a routine debt transaction. Churchill Downs is effectively balancing three competing priorities: extending or replacing existing borrowings, funding growth projects and returning capital while reducing its overall debt burden. Strong free cash flow gives the company flexibility, but the cost of new financing will influence how much cash remains available for expansion and shareholder returns.
Churchill Downs generated about $474 million of free cash flow in the first half of 2026, according to management. That performance gives lenders an important measure of the company’s ability to service debt and supports management’s expectation that leverage can decline as the business transitions toward its preferred portfolio.
For credit investors, the company’s asset sales and concentration around the Kentucky Derby, gaming and TwinSpires will be key considerations. A more focused business could produce more predictable cash generation, but it also leaves Churchill Downs increasingly dependent on a smaller number of operating segments.
The loan refinancing comes at a pivotal point for the Derby operator. Churchill Downs has demonstrated strong earnings growth, but it is simultaneously undertaking a major portfolio transformation and funding large construction projects. Successfully refinancing its debt while completing asset sales could allow the company to lower leverage and preserve capital for its most profitable businesses, setting the stage for a stronger balance sheet ahead of the 2027 and 2028 Kentucky Derby cycles.
