After a year on the sidelines, CNL American Properties Fund Inc. recently returned to market with a $242 million issuance of bonds backed by franchise loans. The deal, managed by Prudential Securities, was structured under Rule 144A and separated into five tranches.

"The unique thing about this deal is that the loan pool is backed 100% by restaurants," a source said. "A lot of the pools that are being done today are mixed pools. And investors, when they see all restaurants, they find that extremely attractive. That's a real plus."

CNL deals exclusively with restaurants, which served them well on this transaction. "For instance, the only distraction during the marketing process was another competing deal that was being price-talked wider than our deal, but it wasn't an all restaurant deal," said the source.

The transaction is backed by 259 fixed-rate, monthly paying, fully amortizing franchise restaurant loans from such franchises as Wendy's, Applebees, Kentucky Fried Chicken and Burger King. The aggregate principal amount of the portfolio is approximately $278 million.

"The company's reputation, along with a conservatively underwritten pool of top restaurant concepts and borrowers, contributed to a successful execution at attractive spreads," said Robert Lawless, director of Capital Markets at CNL.

CNL has been in the restaurant finance industry for a long time, a factor that contributes to its success in restaurant franchise dealing. "A lot of people that do [these franchise deals] don't have the experience that CNL does in serving the industry," he said. "A lot of these other people are just providers of securitized debt, while CNL has been providing financing to the chain restaurant industry for 25 years."

CNL's last deal which, priced in August 1998, was worth roughly $245 million. CNL will most likely do a deal similar in size and composition to their last two deals in the second or third quarter of next year. - KS

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