After writing yesterday about dividend recaps, Moody’s released a report on the $2 billion in new debt being offered up by Dunkin’ Brands.
Since the Term Sheet is fueled by giant plastic cups full of Dunkin’ iced cofee (yes, even in cold weather), a few notes:
The $2 billion deal is split up into three tranches: $1.25 billion guaranteed senior secured term loan(rated B1), $100 million senior secured revolving credit facility (B1) and $625 million in senior unsecured notes (Caa2).
Assuming it all gets sold, Dunkin’s private equity owners — Bain, Carlyle and THL Partners — plan to pocket $500 million.
Dunkin’ is a highly-levered company at 7x EBITDA, although has decent recurring revenue via its franchise model. The downside to franchising revenue, however, is when it comes to actual dollars. System-wide Dunkin’ sales are around $7.5 billion, but the parent company only brings in around $540 million.
Moody’s also notes that Dunkin’s geographic concentration in the Northeastern U.S. may have helped it during the recession, since that region was less severely impacted than were areas like the Southeast or Southwest. Finally, Moody’s wants of price competition from rivals — particularly for Dunkin’ “brand” Baskin Robins.