The DB Master Finance is preparing to issue the sixth series of securitized notes, raising $900 million, secured by various streams of revenue connected to restaurant franchise and development agreements under the Dunkin' and Baskin-Robbins.
Other revenue streams in the deal, DB Master Finance 2025-1, include international franchise and development agreements, international revenues and joint venture distributions, says Kroll Bond Rating Agency.
The current series will issue two tranches of notes, A2-I and A2-II, which are expected to finish repaying investors in November 2030 and November 2032, respectively. The legal final maturity dates are August 2055.
KBRA assigns ratings of BBB to both series of notes.
Barclays Capital is the sole structuring advisor and joint bookrunning manager, KBRA said.
Most of the transaction's cash flows are top-line revenues from franchise locations and are typically less volatile compared to profits from company-operated locations.
Royalty revenues and franchise fees represent 87.3% of securitized collections; intellectual property represents 6.6%; and net rents proceeds represent 5.5%, KBRA said. Other securitized revenue accounts for 0.6% of the asset pool.
The transaction has a leverage level of 6.5x, which is considered high. That is mitigated in two ways, however. On the corporate side, it has a strong business profile and stable top-line revenue.
Further, the securitization structure has a provision that protects the notes should that leverage level slide. The A2 notes have a scheduled amortization of 1.0% per year before the anticipated repayment date (ARD), unless the senior leverage ratio falls below or equal 5.5x, KBRA said.
DB Master Finance also includes a cash trapping debt service coverage ratio mechanism that contributes to credit enhancement. If only any quarterly payment date, the principal and interest DSCR is less than 1.75x, then half of all excess cash flows will be diverted into the cash trap reserve account.
The deal also has a rapid amortization threshold. If on any quarterly payment date, the principal and interest DSCR is less than 1.20x, the notes will be subject to a rapid amortization event.
