Cajun Global LLC is coming to market with a $252.9 million whole business asset-backed securities deal that is larger than the 2017-1 series, and will implement three other key changes from the 2017-1 series, including an increased securitized net cash flow.
Barclays Capital is returning as the sole book-running manager. The capital structure features three classes of notes, compared with just one tranche that characterized the 2011-1 and the 2017-1 deals, according to Finsight.
The bulk of notes, $225 million, will be issued from the A-2 class, according to Kroll Bond Rating Agency, which expects to assign BBB ratings throughout the three classes of notes. The notes have a final maturity date of November 2051.
Also, system-wide sales were $1.2 billion as of the twelve-month (LTM) period that ended Q2 2021, larger than the $1.1 million for the twelve-month period ended Dec. 25, 2016.
The securitized net cash flow (SNCF) increased to about $45.1 million for the LTM of Q2 2021, compared with $39.2 million for the period that ended December 2016, according to KBRA.
Cajun Global 2021-1 includes a cash-trapping period, compared with the cash flow sweeping period that appeared on the 2017-1 deal. If on any quarterly payment date the principal and interest debt service coverage ration (DSCR) is less than 1.7x, but equal or greater than 1.5x, then the trust will deposit 50% of all excess cash flows into the cash trap reserve account. If the DSCR is less than 1.5x, then all of the excess cash will be put into the cash trapping reserve account. Also, the scheduled amortization is much lower, at 1.5%, which is half the amortization of 3% on the previous deal.
The transaction collateral is made up of existing and future franchise agreements extended to domestic and international operators.
Cajun, the company behind the deal, operates and franchises restaurants under the Church’s Chicken and Texas Chicken brand. The Cajun restaurant system includes about 1,566 locations, which had annual system-wide sales of about $1.2 billion for the 12 months ending July 11, 2021.
Kroll Bond Rating Agency noted a couple of potential credit challenges to the deal. For one, Cajun operates in a highly competitive quick service sector (QSR). In recent times, many service-based industries, including restaurants, have had trouble hiring and retaining personnel, so potential labor shortages could increase certain operational challenges.
