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Dunkin' takes third helping of whole-biz ABS in $1.2B deal

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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 on the original $2.6 billion 2015-1 notes offering, which will keep the Canton, Mass.-based company’s leverage at its existing $3.2 billion level, or 6.2x debt-to-earnings.

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.

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Whole business securitization
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