SUBWAY is tapping the asset backed securities market for the second time this year as the sandwich restaurant chain looks to borrow US$2.3 billion.
The company, which has the most restaurant locations of any chain in the US, was purchased by Roark Capital Group in a buyout that closed in April. In May, it sold US$3.35 billion of bonds backed by assets including fees from its franchisees, the largest securitisation of its kind.
Companies with a large network of chains, such as gyms and fast-food franchises, often raise capital in the whole business securitisation market. This pathway offers firms better rates in exchange for giving investors more control, which is doable because of the structure of the business model.
Subway’s latest asset-backed sale is being led by Barclays and Morgan Stanley, according to sources with knowledge of the sale. It includes restaurants worldwide. The transaction is refinancing a term loan. Subway also issued a variable funded note valued at US$400 million earlier this year.
At its current size, the deal would be the fourth largest whole business securitisation, after Subway’s other offering and two transactions from Dunkin’ Brands Group. About a dozen whole business securitisations have already been sold this year totalling more than US$8 billion, including Zaxby’s, a chicken finger restaurant chain, and Nothing Bundt Cakes, a bakery chain.
Issuance in the broader ABS market is running hotter than last year as well. Sales were at about US$242 billion to the end of last week, compared with around US$192 billion for the same period last year.
Representatives for Barclays and Morgan Stanley declined to comment. Subway did not respond to a request for comment.
The prior record-setting deal from Subway saw elevated investor demand. At the time, investors placed nearly US$20 billion in orders on the US$3.35 billion of bonds for sale. BLOOMBERG
