Jersey Mike's orders up $500M whole-business securitization

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The Jersey Mike’s quick-serve sandwich franchise is turning to whole-business securitization to refinance debt, fund expansion efforts and provide a dividend to the owners.

According to presale reports, Jersey Mike’s Franchise System Inc. will assign its operational business and franchise revenues to a new trust, Jersey Mike’s Funding, which will issue $500 million in senior-term ABS notes. The notes have an anticipated February 2027 repayment date.

The notes have preliminary BBB ratings from S&P Global Ratings and Kroll Bond Rating Agency, two agencies that typically rate franchise-fee securitizations that have grown more popular as a financing vehicle by national and regional franchise chains – most of them in the quick-serve restaurant sector.

The agencies’ presale reports note the proceeds will be used to repay existing debt, as well as fund a $125 million enhancement account that will be used to remodel most of the 1,615 stores that are 99% franchised. The notes sale will also fund a $215 million dividend and bonus payment program.

The sale will result in a total debt-to-EBITDA ratio of 6.4x, according to the reports.

Jersey Mike’s, based in Manasquan, N.J., was founded in 1956 and began franchising in 1987. But the company’s rapid expansion has been more recent, opening more than 1,300 stores since 2006 (a cumulative average annual growth rate of 19% during that time).

The new transaction was structured by Guggenheim Securities.

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