Dunkin' Brands, the parent company of Dunkin' Donuts and Baskin-Robbins, said in a press release that it achieved an attractive rate of financing on its $2.6 billion securitization.
Investor demand for the transaction, DKN 2015-1, allowed the issuer to upsize the transaction to $2.6 billion from $2.4 billion. The class A-2-II notes, structured with a weighted average life of 6.8 years, were sold at a spread of swaps plus 225 basis points, yielding 4%.
The shorter dated class A-2 notes, with a weighted average life of four years, yielded 3.26%. Standard & Poor's gave 'BBB' to the notes, a notch above Dunkin's bank facility, rated 'B+' by S&P and 'B1' by Moody's Investors Service.
The securitization trust is backed by proceeds from the company's franchises, which include over 18,600 restaurants in 56 countries. 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.
Dunkin also entered into a purchase agreement for the issuance of up to $100 million of Series 2015-1 Variable Funding Senior Notes, Class A-1 (the "VFN"), which allows the issuer to borrow amounts on a revolving basis and issue letters of credit.
"The new debt structure leverages our business model's ability to generate strong cash flow and increases our financial flexibility. We are adjusting our adjusted earnings per share guidance that we provided on December 18, 2014, for the anticipated impact of this transaction and the expected use of proceeds on interest expense and shares outstanding. This results in amended guidance from $1.88 to $1.91 to $1.83 to $1.87," said Paul Carbone, Chief Financial Officer, Dunkin' Brands in the press release.
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 replenish its share repurchase authorization to $110 million.
