Another new issuer of securitized bonds is coming to market, as Scooter's Coffee prepares to raise $375 million in bonds secured by top-line royalty payments from franchise locations of its coffee business.
Scooter's Coffee brand sells beverages through a network of 910 locations across 32 states, virtually all of which are franchises (98%), according to analysts at Kroll Bond Rating Agency. The brand sells coffee through various formats, including coffeehouses or endcaps with drive-thrus and kiosks, the rating agency said.
Scooter's Coffee had systemwide sales of about $800 million.
The deal will sell notes through three tranches of class A1 and A2 notes, according to KBRA analysts. The A1 tranche has an anticipated repayment date of May 2029. The A1 tranche, with an advanced funding facility, and the A2 tranche, have a May 2031 anticipated repayment date.
All the notes have a final maturity date of May 2056, and they all have an anticipated BBB- rating, analysts said.
KBRA finds that the A2 notes have a scheduled amortization of 1.0% per annum before the annual repayment date (ARD). But that scheduled amortization would be 0% if the senior whole business securitization (WBS) ratio is less than or equal to 5.5x, the rating agency said.
The senior notes have the benefit of an interest reserve account that covers three months of interest payments on class A notes.
There is a cash sweeping provision, which stipulates if on any quarterly payment date, the securitized capacity leveraged ratio exceeds certain specified levels, then 25% of all excess cash flows will be directed to pay down the notes in full, KBRA said.
Scooter's Coffee also has a cash trapping debt-service coverage ratio (DSCR) threshold of 1.75x, and a rapid amortization event triggered if the principal and interest DSCR is less than 1.20x.
