Dunkin’ Brands plans to sell another US$1.15bn of bonds backed by its popular coffee and donut chains, giving investors a taste of more esoteric ABS.
The company has been a pioneer of whole business securitizations (WBS) in the US, completing its first such deal more than a decade ago.
Its new bonds have been earmarked to replace some of Dunkin’s US$1.7bn of outstanding 2015 ABS debt with longer-dated maturities - and at potentially lower spreads.
Early whispers for the 6.8-year class has been floated in the 175bp-195bp area over interpolated swaps, according to an investor.
The outstanding 2015s with an initial 6.8-year weighted average maturity priced at a 225bp spread over Swaps and a 4% yield, according to IFR data.
Guggenheim Securities was tapped to structure the deal and act as a joint lead bookrunner with Barclays.
FIRST OF 2019
Issuance of WBS has been slow to restart in 2019 after a sharp sell-off at year end left investors feeling skittish.
For example, Driven Brands priced a US$300m 6.8-year Triple B rated WBS trade on Tuesday at 215bp over interpolated swaps.
Those bonds and the Dunkin’ deal have been the only WBS so far this year, according to IFR data.
WBS issuers, however, that decided to delay offerings for a better market may find it was worth the wait.
Off-the-run and higher credit risk ABS have been in demand this week as spreads on more mainstream assets have been diminishing.
Investors in the Dunkin’ deal, which has yet to officially roll out, will have their pick of three classes rated Triple B by S&P, with maturities in a 4.7-year to 9.5-year range, according to deal materials.
The issuer has the option to increase its deal to a maximum of US$1.7bn.
WBS has been expanding beyond its original base of quick-service eateries and in recent years has branched out to include coin machines, fitness centers and automotive service chains.
The expansion has helped outstanding WBS issuance, with S&P ratings, to grow three-fold in the past five years to US$35.4bn through the end of 2018, according to S&P data.
