Nothing Bundt Cakes, the specialty bakery franchisor and securitization sponsor is returning to the asset-backed securities (ABS) market with its third deal since its debut in July 2021, aiming to raise $240 million in bonds.
The deal includes subordination in the form of class B notes, a rarity for whole business securitization deals, according to ratings analysts at Kroll Bond Rating Agency.
Cash flows from franchise location payments and related distribution profits will fund the transaction. The single-tranche deal is being led by Barclays, which is on the deal as the sole structuring advisor and the sole bookrunning managers. FTI Consulting is on the deal as backup manager, KBRA said.
The Asset Securitization Report's deal database nots that the deal is expected to close on May 31, and has a final maturity date of July 2054. As the NBC Funding 2024-1 issues the notes to investors, the program will refinance the NBC 2023-1 A-1-VFN notes, and the rating agency will withdraw the rating on those, the company said. KBRA assigns BBB- to the class A2 notes, the rating agency said.
Founded in 1997 and based in Addison, Texas, Nothing Bundt Cakes has a system of 582 bakeries that specialize in, of course, bundt cakes. Most of the store locations (97%) operate as franchises across 43 states and Canada.
NBC's systemwide sales are smaller than other whole business securitizations that KBRA rates, especially in the food sector, the company said. Still, the system has shown meaningful growth since the company's inaugural securitization deal in 2021. The store unit count was 582 as of Q1 2024, up from 387 in March 2021, and sales grew accordingly, registering $783 million for the lagging twelve-month period ended in Q1 2024, up from $467 million for the LTM ending March 28, 2021, KBRA said.
NBC's deal structure—a revolving master—benefits from several key structural features, including subordination and a trigger for cash flow sweeping debt service coverage ratio. With the latter, should the securitized capacity leverage ratio exceed a certain level, then 25.0% of all excess cash flows will be used to pay down the notes. NBC Fundin
is the only outstanding whole business securitization deal to include that feature, but the trigger is not expected to be in effect if Nothing Bundt Cakes' systemwide sales meet or exceed $1 billion and the series 2021-1 class A2 notes and series 2021-class b notes are fully repaid.
