Tropical Smoothie Café, which franchises limited-service restaurants that offer smoothies, wraps and bowls, is pledging revenue from existing and future franchise and license agreements and other financial assets, to support $270 million in asset-backed securities (ABS).
TSC SPV Funding uses a master trust structure and starts out issuing two tranches of class A2 and M notes. Both have an anticipated repayment date of May 2031, and a legal final maturity date of May 2056, according to Kroll Bond Rating Agency.
With a master trust structure in place, the deal can issue additional notes throughout the term of the deal, according to Kroll Bond Rating Agency. While Tropical Smoothie Café is managing the deal, FTI Consulting is on as backup manager, KBRA said.
Franchise royalty revenue account for most of the cash flow dedicated to the bonds (67.0%) but will also be among supplier and manufacturer rebates (22.6%) other fees and brand fund rebates, the rating agency said.
The transaction will pay interest on each quarterly payment date, and the A2 notes feature scheduled annual amortization of 1% to the anticipated repayment date, including a senior leverage ratio of below 5.5x.
The transaction, slated to close on May 29, is the first since affiliates of Blackstone bought TSC for $1.7billion in June 2024, according to the rating agency.
Barclays Capital is the deal's sole structuring advisor and lead left book runner, KBRA said.
The deal structure includes several credit protections, such as an interest reserve account that covers about three months of class A note interest payments.
A cash trapping debt service coverage (DSCR) ratio threshold stipulates that if the principal and interest DSCR falls between 1.75x and 1.50x on any quarterly payment date, then 50% of all excess cash flows will be deposited into the cash trap reserve account.
If the DSCR falls below 1.50x, then all excess cash flow will be deposited into the cash flow, the rating agency said.
There is also a rapid amortization provision that will trigger a rapid amortization event if the principal and interest is less than 1.20x.
