Pizza Hut is borrowing against its franchise checks. The pizza chain is marketing about $1 billion of bonds backed by the royalties its restaurant owners pay, a first for the brand and a sign of how its new private-equity owner plans to finance the business.
The deal is a whole-business securitization, a structure that bundles a brand’s franchise fees, royalties, advertising contributions, vendor rebates and trademarks into a separate company that issues bonds against those cash flows. Pizza Hut of America will contribute substantially all of its North American revenue-generating assets to the new issuer, Pizza Hut Issuer LLC, Kroll Bond Rating Agency said as it assigned preliminary ratings to four classes of notes. S&P Global Ratings and KBRA have rated the notes BBB.
Refinancing the buyout
LongRange Capital acquired Pizza Hut from Yum Brands, which now centers on KFC and Taco Bell. Proceeds from the bonds will refinance existing corporate debt tied to that purchase, pay transaction costs and fund an interest reserve, with anything left over going to investments in the U.S. and Canadian businesses. At least $600 million of notes are being offered first, alongside a separately marketed tranche, with an expected average life of about 4.8 years and pricing expected at two to three percentage points over benchmark rates. UBS is leading the sale, with Barclays, Bank of America, Guggenheim Securities and Rabo Securities among the bookrunners.
Why lenders like the collateral
The pool behind the bonds generated about $5.4 billion of systemwide sales over the 12 months through the second quarter of 2026 from about 6,678 restaurants in the U.S., Canada, U.S. territories and military bases, more than 99% of them run by franchisees. That model is what makes the structure work: the owner collects a cut of sales without running the kitchens, so the cash flow is steadier than the restaurants’ own profits.
Domino’s pioneered the approach among fast-food chains in 2007, and Burger King owner Restaurant Brands, Sonic, Arby’s and Subway have used versions of it since. For a buyout firm, the attraction is cost: investment-grade securitized debt typically comes much cheaper than the leveraged loans used to fund the purchase, freeing cash for remodels and technology across the franchise system.
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