Dunkin’ Brands is sponsoring its third whole-business securitization, with plans to use the $1.2 billion in term- and variable-note proceeds to pay down debt from its initial 2015 ABS transaction.
DB Master Finance Series 2019-1 will include $1 billion in three note class, plus a $150 million in variable-funding Class A-1notes that will retained
The trio of Class A-2 note tranches have staggered maturities, with a 4.75-year expected maturity for the $350 million in A-2-I notes; seven years for the $350 million A-2-II notes and 10 years for the A-2-III notes totaling $300 million.
All of the notes, including the VFN, carry preliminary BBB ratings from S&P Global Ratings.
The company will apply $985 million of note proceeds to pay down debt
Company management has pledged that any additional debt issued from the master trust (minus fees) will be used for paying down the remainder of the 2015-1 notes.
Dunkin's previous issuance was a $1.55 billion series issued in October 2017.
Dunkin’ Brands will back the 2019-1 series notes from the operating revenues plus the licensing, royalty and franchise fees from its entire base of 20,912 locations of Dunkin’ coffee and doughnut shops and Baskin-Robbins retail ice cream stores. Dunkin’ Brands, a 70-year-old firm, is entirely franchised after converting the last of its corporate-owned stores in 2016. No other whole-business securitized restaurant chain rated by S&P has a 100% franchised base.
Its domestic locations are heavily concentrated in the Northeast U.S. and internationally in Asia. Store counts have grown at 3.9% per year since 2006, but were flat for 2018 compared to 2017. The small number of net new stores (278) were in international markets.
Last year the chain had $11.6 billion in global systemwide sales, which have grown at a “strong” 5.4% annual rate since 2006, according to S&P.
The average unit sales volume is $800,000 per store for the franchise, but approximately $950,000 for the domestic Dunkin’ stores producing 82% of the chain’s sales.
About 85% of the cash flow in the deal will come from franchise revenue royalty payments.
