Investing.com — Jersey Mike’s Subs is selling approximately $760 million of bonds with an unusual feature that allows the sandwich chain to repay about half of the principal early using proceeds from a future initial public offering.
The company, owned by private equity firm Blackstone, is working with three banks to complete an IPO as soon as the third quarter, potentially raising up to $1 billion in the equity sale, Bloomberg reported on Wednesday.
The current bond offering consists of securitized “whole business” securities, in which Jersey Mike’s pledges essentially all of its revenue-generating assets as collateral. This type of bond structure is commonly used by restaurant chains with franchises.
The deal includes a provision allowing up to half of the debt to be paid down with IPO proceeds without incurring a penalty. Funds from the bond sale will be used to refinance existing whole business bonds from 2019 and 2021.
Jersey Mike’s previously sold whole business bonds in July, marking this as their second recent entry into the debt market ahead of their anticipated public offering.