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NEW YORK-A recently completed securitization deal by Triarc Cos. Inc. represents the flip side of insurance risk securitizations done in recent years, with capital market risk being transferred into the insurance markets.
The deal involved securitizing intellectual property, in the form of franchise royalties and fees from current and future owners of Arby's fast-food restaurants in the United States and Canada. The Arby's chain is owned by New York-based Triarc.
The $290 million note sale utilized a special-purpose vehicle structure, with the notes sold in a private placement through a Delaware-based business trust, Arby's Franchise Trust.
Key to the deal was an insurance and reinsurance platform involving a financial guarantee insurance policy from Ambac Assurance Corp., reinsured on a first-loss basis by Swiss Re Group subsidiary European Reinsurance Co. of Zurich, Bermuda Branch, with Ambac taksing an excess risk position.
Swiss Re New Markets Corp. helped structure the deal. Morgan Stanley Dean Witter & Co. led the notes' underwriting, and ING Barings co-managed the transaction. Triarc received approximately $250 million from the financing, with approximately $30 million placed in a reserve account and the remainder representing transaction fees and expenses.
Compared to a traditional high-yield capital financing, the royalty securitization "was a better, lower cost, more efficient...