CNL American Properties Fund Inc. had the buyside lined up for $283 million of triple-net lease mortgage bonds and Banc of America Securities, Rabobank and Prudential Securities took the potential applications.
At press time, the deal was set to price and sources close to the transaction were predicting positive results. "Based on the reception I don't think [it's] going to have any problems," said one source.
The CNL deal appeared in two tranches that were broken down into a $103.7 million piece that carried a five-year average and a $177.2 million portion with a 12.86-year average life.
"The final maturity is set for 21years but there is still some question about the shorter piece," commented one source following the deal.
The bonds came wrapped with an MBIA Inc. financial guarantee that effectively aided the group's triple-A rating. "When we took a look at this deal, the MBIA package took an important role," said one buyside source.
But sources following the transaction reiterated that though the wrap added more meat to the deal, the company's underlying structure carried it. "It's always important to take a look at what the issuer looks like because if MBIA leaves town you have to have something secure left behind," explained one sellside source.
Typically, franchise loan structuring carries with it the extra worry of how the lessor will play his role. If the lessor forgets to pay his taxes, then the government takes away the property, explained one source familiar with the transaction. With CNL, all of that is bypassed, easing investor anxiety.
CNL, who's been in the private placement market before, counts competitive clients, like Jack in the Box and IHOP, in its roster. "These companies approach CNL and ask for cash and build. What's different here is that CNL owns the property and leases it out," said the source.
"It is still the responsibility of the lessor, in this case the restaurant owner, to pay all the burdens. If you are a debt provider all you worry about basically is the financing," added the source.
One buyside source pointed to the added team effort provided by the agents and said, "Pru, B of A and Rabobank all sold bonds on the deal. It was great teamwork, good effort."
With over 1,560 investments in properties in 46 states, the group has an estimated $1 billion in restaurant real estate. The group provides a range of financial, developmental, advisory and other real estate services to operators of national and regional chains. Triple-net leasing, mortgage loans, secured equipment financing are listed among the variety of financial services offered by the group.
