On 26th January 2015, Dunkin' Brands Group, Inc., the parent company of Dunkin' Donuts and Baskin-Robbins, had completed refinancing its senior secured credit facilities with a new securitized financing facility. It had announced its intention to refinance its senior secured credit facility on 6th January, 2015.
In 2006 Dunkin' Brands had executed a similar financing facility. It had raised $1.7 billion by securitizing royalty from its franchise in fast food chains Dunkin' Donuts, Baskin-Robbins and Togo's. The triple-A rated offer included $1.5 billion in senior notes backed by Ambac Assurance. The money raised was used in the $2.4 billion acquisition of Dunkin' Brands by a group of three private equity firms, the Carlyle Group, Thomas H Lee Partners and Bain Capital.
The Dunkin' deal was the first time a buyer had securitized franchise royalty payments, intellectual property, leases and other licensing receivables. The securitisation of the royalty payments of franchises for acquisition of Dunkin' Brands deal was as close to a whole business securitization as is possible under US law.
Apart from Dunkin’ Brands $1.7 billion franchise royalty securitization in 2006, $1.8 billion Sears Holdings transaction in 2007, and deals from Applebee’s and IHOP in 2007 were also one of the biggest intellectual property securitizations. Sears ring-fenced and sold its Kenmore, Craftsman and DieHard brands into a special-purpose entity called KCD IP (Kenmore Craftsman DieHard Intellectual Property) and licensed them back for their own use. Following chart is the graphical representation of the same.
In two separate transactions, IHOP securitized the intellectual property of Applebee’s and of IHOP itself as part of its buyout finance for the purchase of Applebee’s. The Applebee’s deal came in at $1.8 billion, and IHOP’s IP portfolio was valued at $245 million.
As of September 27, 2014, the outstanding balance under Dunkin' Brands' senior secured credit facility was approximately $1.9 billion.
Dunkin’ Donuts had begun marketing the US$2.6bn securitization, following in the footsteps of DineEquity, Inc., parent company of Applebee’s, who had through its special purpose subsidiaries (the “Co-Issuers”) issued, in a privately placed securitization transaction, $1.3 billion series 2014-1, class A-2 fixed rate senior secured notes (Bonds) and $100 million series 2014-1 variable funding senior notes. Yield on the 7 year fixed rate tranche was 4.3%. The Co-Issuers and their subsidiaries own substantially all of the Applebee’s and IHOP domestic franchising, rental and financing assets and are intending to use cash flows generated from these assets to make interest and principal payments on the Bonds.
On 26th January, Dunkin Brands completed its refinancing with the placement, by its special purpose subsidiary (the "Master Issuer"), of a $2.6 billion securitized debt facility. Dunkin' Brands replaced its $1.9billion senior secured credit facility with a new securitized financing facility, comprised of $2.5 billion of senior fixed-rate term notes (Notes) and $100 million of variable funding notes. Further, the $2.5 billion Notes consists of two tranches with expected repayment dates of four years bearing interest of 3.262 percent per annum for $750 million and seven years bearing interest at the rate of 3.765 percent per annum for $1.75 billion, respectively. The respective interest rates for the two tranches have brought the weighted-average effective interest rate to 3.765 percent per annum and the same is payable quarterly. All three tranches in the securitization had been rated BBB by S&P analysts.
The Master Issuer and its subsidiaries hold the right to receive payments on significantly all of the Company's revenue-generating assets and are intending to use the cash flows generated from these assets to make interest and principal payments on the Notes.
Reported by: Surbhi Jaiswal
Date: 5th February, 2015