Qdoba Restaurant's second whole business securitization is poised to raise $442.2 million in asset-backed securities (ABS), backed by revenues from its network of franchise restaurants.
The transaction, Qdoba Funding Series 2026-1, will issue three tranches of class A notes, including one of variable funding notes, according to Kroll Bond Rating Agency. The A2 piece, will issue the bulk of the transaction, $360 million, KBRA said.
KBRA assigns BBB to all the tranches. The A1 and A2 tranches have anticipated repayment dates of June 2029 and June 2031, respectively. All of the tranches have a legal final maturity date of June 2056, the rating agency said.
All the notes have a BBB rating from KBRA.
Barclays Capital is the sole structuring advisor and sole book-running manager, the rating agency said. Qdoba Restaurant is the manager, and FTI Consulting is on the deal as back-up manager, KBRA said.
Qdoba Funding's capital structure includes a reserve account for interest on the senior notes, which covers about three months of payments on the class A notes, KBRA said.
There is also a cash trapping mechanism based on the assets' debt service coverage ratio (DSCR), KBRA said. The deal will make quarterly payments to noteholders, and if the principal and interest DSCR is less than 1.75x, then 50% of all excess cash flows will be deposited into the cash trap reserve account, after step 13 in the priority of payments.
All the excess cash will be deposited if the DSCR is less than 1.50x, the rating agency said.
The securitized pool of assets includes 841 restaurants operating across 45 states, the District of Columbia and Puerto Rico, Canada, South Korea and Japan, as of Q1 2026, according to KBRA. This contributes to the pool's geographic diversity, and its diversification follows by state.
Colorado accounts for 9.9% of all locations, followed by Michigan and Wisconsin, with 8.6% and 7.0% of the pool, respectively. International restaurant locations only account for 2.1% of the pool by location count, with Canada representing the largest portion, at 1.7%.
