Dunkin' Brands, the parent company of Dunkin' Donuts and Baskin-Robbins, is returning to the securitization market to refinance its senior secured credit facility. The securitization trust, called DB Master Finance (Series 2015-1), is backed by proceeds from the company's franchises, which include over 18,600 restaurants in 56 countries.
The trust will issue $2.4 billion of senior fixed-rate term notes and $100 million of variable funding notes. Proceeds will be used to repay Dunkin's $1.8 billion senior secured term loan due in 2021 and a $100 million senior secured revolving credit facility due in 2019. The remaining proceeds will be used for general corporate purposes, including stock repurchases.
Standard & Poor's plans to rate the new deal, which is known as a whole business securitization. On offer are $100 million of class A-1 notes, $600 million of 'BBB' rated class A-2I notes and $1.7 billion of rated class A2-II notes. Both tranches are rated 'BBB', which is five notches above Dunkin's bank facility, which is rated 'B+' by S&P and 'B1' by Moody's Investors Service.
S&P noted in its presale report that an additional $200 million of class A2 notes may be offered within three years of the transaction's closing date of Jan. 26, 2015. All of the notes are due Feb. 20, 2045.
Guggenheim Securities is the lead manager on the transaction.
Whole business securitizations are often used by portfolio companies of private equity funds to refinance more expensive debt used to fund their buyouts. That's what prompted Dunkin's first trip to the securitization market for $1.7 billion in 2006. It used the proceeds to replace debt funding its buyout by Pernoud Ricard, Bain Capital, Carlyle Group and T.H. Lee Partners.
In 2010, the company obtained its current bank facility, using proceeds to redeem the whole business deal and pay a $500 million dividend to shareholders. The bank facility was amended in January 2014 to reduce the interest rate, extend the maturity and eeplenish its share repurchase authorization to $110 million.
Dunkin's annual revenues are approximately $690 million, although systemwide sales are over $9.0 billion. The compay's return to the securitization market may speak to the rising cost of borrowing money in the leveraged loan market.
“Securitization provides an opportunity to lock in long-term fixed-rate funding at an attractive level,” Benjamin Fernandez, a managing director at Barclays, said at a roundtable held by Standard & Poor's last month. “As we've seen the loan markets sell off recently, the interest savings are becoming more meaningful and the other benefits of securitization--increased flexibility on free cash flow deployment, for example--make the financing structure very attractive.”