Bojangles, a US fast food chain that specializes in fried chicken, is in the market with a US$625m whole business securitization that will be used to refinance its first asset-backed deal, which priced four years ago.
In addition to repaying the US$415m of bonds that printed in 2020, proceeds from this week's deal will be used for general corporate purposes including funding an acquisition of a smaller chicken restaurant business and a dividend to shareholders.
The WBS issue is backed by revenues from the restaurant franchiser and comprises a US$575m five-year security and a US$50m variable funding note, which will not be syndicated. Kroll and DBRS Morningstar are expected to rate the securities BBB/BBB.
Guggenheim is the sole bookrunner for the deal, called Bojangles Issuer LLC 2024-1.
The offering is drawing solid demand from investors seeking wider spreads than corporate bonds with similar ratings, a portfolio manager familiar with the deal said.
Initial price thought on the five-year note is the high 200bp area over US Treasuries, he said. It is much wider than the average spread of 110bp on Triple B rated corporates last Friday, BofA ICE data show.
"The spread pickup is significant. You are getting compensated for being a less liquid name than a Dunkin or a Subway," the portfolio manager said.
Moreover, Bojangles, which was taken private by TJC and Durational Capital in 2019, has demonstrated solid sales growth, he noted.
The North Carolina-based company's same-store sales growth for franchised restaurants was 4.5% for the 12 months ended June 30 2024, according to KBRA's presale report. There are 819 Bojangles restaurants in 16 US states, of which 65% are operated by franchisees.
The Bojangles deal will push whole business issuance above the US$10bn mark for the second time ever, according to IFR data. In 2021, the sector racked up a record US$14.6bn in total supply.