In its first deal of the year, Dunkin Brands is preparing to issue securitized bonds secured by cash flows from franchise and development agreements on 22,228 Dunkin and Baskin-Robbins restaurants.
DB Master Finance 2025-1, or "Dunkin 2025-1," will issue notes through two tranches, raising $1 billion to refinance the master issuer's series 2019-1, class A2II notes, and repay outstanding principal balance on the series 2023-1 notes, class A1 notes, according to ratings analysts at Kroll Bond Rating Agency.
Royalty revenue and franchise fees are expected to account for 87.3% of securitized collections. Proceeds from intellectual property (6.6%) and revenue from net rents (5.5%) and other securitization income comprise the rest, KBRA said.
Dunkin 2025-1 will issue the notes through two tranches. Classes A-2-I and A-2-II have anticipated repayment dates (ARD) of November 2030 and November 2032, but a legal final maturity date of August 2055, the rating agency said. Both classes get a BBB rating from KBRA.
Barclays Capital is the sole structuring advisor and bookrunning manager, the rating agency said.
Domestic restaurants in 48 states account for most of the locations, about 54%, while international locations account for 45.5% of the sites, KBRA said. The top three states account for 17.2% of the total locations.
Several deal elements keep cash flowing to noteholders, including an interest reserve account on the senior notes, KBRA said. In terms of principal payments, class A2 notes have a scheduled annual amortization of 1.0% before their anticipated repayment dates. The only disruption to that is if the senior leverage ratio is less than or equal to 5.5x, with out nay rapid amortization condition in place.
Another protection is a cash trapping threshold linked to the revenues' debt service coverage ratio (DSCR), the rating agency said. If on any quarterly payment date the principal and interest DSCR is less than 1.75x, then half of all excess cash flows will be deposited into the cash trap reserve account.
If the DSCR is less than 1.50x, then all of Dunkin 2025-1's excess cash flows will be deposited into the cash trap reserve account.
