(Bloomberg) -- Popular chicken finger chain Raising Cane’s Restaurants LLC sold a $500 million leveraged loan on Tuesday, after tightening pricing on the debt on the back of strong investor demand.
The Baton Rouge, Louisiana-based chain priced its seven-year senior secured term loan at 2 percentage points over the Secured Overnight Financing Rate, according to a person familiar with the deal. The loan priced at a discount of 99.75 cents on the dollar, the person said, asking not to be identified discussing private details.
The issuer was able to flex the margin downwards on the loan from initial talk ranging between 2.25 to 2.5 percentage points over the benchmark, and a discounted price of 99.5 cents, the person added.
A spokesperson for Bank of America Corp., which led the deal, declined to comment. A spokesperson for Raising Cane’s didn’t reply to a request for comment.
The US leveraged loan market has seen returns topping 6% this year, fueled by rising interest rates and a dearth of new-money deals. In the secondary market, prices for the risky loans have risen to just under 97 cents on the dollar after an early August dip. However, issuance has made a comeback this month as corporations try to get ahead of any volatility surrounding upcoming economic data releases and the US election, with more than $56 billion of deals brought so far in September, data compiled by Bloomberg shows.
Raising Cane’s’ Tuesday offering marks the second time the restaurant chain has tapped public debt markets, following a high-yield bond sale toward the end of last year. The chain may use proceeds from its latest deal to pay down $354 million of debt under its existing $1.2 billion revolving credit facility, according to S&P Global Ratings.
The chain, known for its chicken fingers and dipping sauces, has expanded rapidly in the last several years and now boasts more than 800 locations across the US and abroad. Its success has made founder Todd Graves, who held a roughly 90% ownership stake in the business as of last fall, a multi-billionaire, according to the Bloomberg Billionaires Index.
“Raising Cane’s maintains an aggressive growth and dividend policy, with annual capital expenditures (capex) of $700 million and a growing level of dividends,” S&P analysts led by Emal Wafajow wrote in a note last week.
The ratings firm expects to see robust growth and stable margins over the next year, with estimated leverage — a ratio of debt to earnings — staying in the high-three-times area through 2026.
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