(Bloomberg) -- Subway has sold $2.34 billion in securities, the sandwich chain’s second deal backed by assets including franchises in barely three months, as the company refinances buyout debt ahead of likely US interest-rate cuts.
The three-tranche deal, rated BBB by S&P Global Ratings, is the fourth-largest whole business securitization. The biggest was the $3.35 billion sale that Subway did in late May. The two offerings make up more than half of the market’s total volume this year.
Companies like Subway tap the WBS market to raise capital at often discounted rates compared to other sources. They’re able to get better rates because they pledge most of its assets as collateral, including franchise fees. Unlike the first deal, Subway’s latest includes international stores as collateral. Proceeds will pay a term loan used to help fund April’s acquisition by Roark Capital Group.
The new offering’s shortest-dated class priced at 175 basis points above the benchmark, right where it guided investors earlier this week, according to people familiar with the matter who asked not to be identified as they’re not permitted to speak publicly. Orders for the total deal topped $3 billion, they added.
May’s transaction was more popular with investors. Overall orders were about $20 billion, with the spread on its shortest-dated class at 150 basis points and all tranches pricing at least 30 basis points tighter than guidance.
Barclays Plc and Morgan Stanley led the bond sale. Barclays declined to comment while Morgan Stanley, Roark and Subway didn’t respond.
There have been 13 whole business securitizations this year, including for chains Planet Fitness Inc. and Tropical Smoothie Cafe.
--With assistance from Scott Carpenter and Charles Williams.
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