(Bloomberg) -- Pizza Hut Inc. is looking to finance its $1.5 billion buyout by selling a series of bonds backed by the fees it receives from franchising its restaurants, according to people with knowledge of the transaction.
UBS Group AG provided the funding and is due to lead a transaction that will be structured as a whole-business securitization, said the people, who requested anonymity because the discussions are not yet public. Pizza Hut's debt is expected to get rankings from credit-rating companies before a deal will launch, the people added.
Earlier this month, LongRange Capital closed on its acquisition of Pizza Hut from Yum! Brands Inc. after a two-part sale was reached in June. Yum China Holdings Inc. had agreed to buy the China-based business for $1.2 billion, while LongRange acquired the rest for $1.5 billion.
A representative for Pizza Hut did not immediately respond to a request for comment. Representatives for LongRange and UBS declined to comment.
Whole-business securitizations are typically done on a so-called best-efforts basis. A special purpose vehicle is set up to protect holders of the debt from any bankruptcy proceedings.
Dunkin' Brands Group Inc. used the method to raise $900 million in October, while Taco Bell Corp. and Domino's Pizza Inc. have also recently raised capital through this type of debt.
While whole-business securitizations are considered a lower cost of capital for casual-dining businesses, some restaurant chains from Hooters to Red Lobster have loaded up on such debt, and gone bankrupt later.
FAT Brands Inc., which owns chains from Fatburger to Johnny Rockets, filed for bankruptcy in January. The company did not make interest payments due last October on some of its $1.2 billion in whole-business securitizations.
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