It looks as if the Boys are busting out Dunkin Donuts

[seanm123]

Re: It looks as if the Boys are busting out Dunkin Donuts

You mean Lehman, well they went under but not before the awards were handed out in the best of category for the Dunkin securtization.
http://www.totalsecuritization.com/A...kin__Deal.html

[mmr]

Re: It looks as if the Boys are busting out Dunkin Donuts

Underwriters on the high-yield bonds and term loan (shorter-term, lower-cost financing): Barclays (aka Lehman), Merrill, JP Morgan, and Goldman. The high-yield bonds have likely long since been flipped to bond funds and the term loan has probably been syndicated (resold, effectively) to any number of other banks.

The economics used to work as follows:

- CIT would make loan to franchisee so that he / she could pay large initial franchise fee ($40- $80K) to Dunkin and set up the store

- Dunkin corporate would do highly useful stuff like "focus on menu innovation, marketing, franchisee coaching and support" [all quotes are from their own SEC filings], and they'd also be happy to lease you a space for your new franchise

- In exchange, "the vast majority of our new franchise agreements require our franchisees to pay us a royalty of 5.9% of gross sales"

See if you can find the value add: "Nearly 100% of our locations are franchised, allowing us to focus on our brand differentiation and menu innovation, while our franchisees expand our points of distribution. This expansion requires limited financial investment by us, given that new store development and substantially all of our store advertising costs are funded by franchisees. Consequently, we achieved a strong operating income margin of approximately 34% in fiscal 2010. With strong operating income margins and low capital requirements, we generate strong and consistent cash flow. For our domestic businesses, because our revenues are largely derived from royalties based on a percentage of franchisee revenues, as well as contractual lease payments and other franchise fees, we are not directly impacted by changes in restaurant-level profitability, including the impact of increases in commodity costs. We offer our franchisees significant operational support aiming to continuously improve restaurant profitability. One example is supporting their supply chain, where we believe we have facilitated approximately $220 million in cost reductions since 2008 through strategic sourcing and other initiatives. "

Don't know about franchise renewal or failure rates.

Probably the private equity funds will refinance the debt at lower rates shortly after the IPO is done and indirectly use the IPO proceeds to pay themselves another dividend.

BTW, the CEO of CIT at the time is now a vice-chairman at... take a guess... Barclays. The new CEO of CIT was... take a guess... John Thain, former CEO of Merrill.

Small world.