Planet Fitness Announces Sale of $800 Million Bonds Backed by Majority of Its Assets
Planet Fitness has commenced the sale of $800 million in bonds backed by the majority of its assets, which represents another significant whole business securitization deal. The fixed-rate bonds, structured by Guggenheim, are divided into two portions of $400 million each, both of which have received a BBB rating from S&P Global Ratings and Kroll Bond Rating Agency. The sales proceeds will be used to refinance existing debt from 2018 and potentially return capital to shareholders. This funding approach, where a company pledges its revenue-generating assets to a special purpose vehicle that then issues bonds, is particularly popular among franchise-heavy businesses like Planet Fitness. The company previously utilized this strategy in a $975 million deal in January 2022. The trend of whole business securitizations is on the rise, with this year's volumes notably augmented by Subway's record-setting $3.35 billion offering.
Key Takeaways
- Planet Fitness sells $800 million in bonds backed by the majority of its assets.
- Guggenheim structured the deal, offering two $400 million bond portions.
- Both bond portions are rated BBB by S&P and Kroll Bond Rating Agency.
- Proceeds from the bonds will refinance 2018 debt and potentially return capital to shareholders.
- This marks Planet Fitness's latest whole business securitization, following a $975 million deal in 2022.
Analysis
The $800 million bond sale by Planet Fitness, structured by Guggenheim, leverages its assets for refinancing and potential shareholder returns. This whole business securitization, which is common in franchise-heavy sectors, reflects a growing trend exemplified by Subway's $3.35 billion deal. Immediate impacts include debt relief and potential shareholder benefits, while long-term effects could enhance financial flexibility and market competitiveness. The BBB assessments from rating agencies imply moderate risk, which could influence investor confidence and market dynamics. If successful, this strategy may encourage similar moves by other franchise-based companies, potentially altering traditional financing landscapes.
Did You Know?
- Whole Business Securitization: A financing method where a company uses its revenue-generating assets to back the issuance of bonds through a special purpose vehicle (SPV). This allows the company to access capital by leveraging its operational assets, rather than just specific assets like mortgages or receivables.
- Special Purpose Vehicle (SPV): A legal entity created to fulfill narrow, specific or temporary objectives. In securitization, an SPV is used to isolate financial risk from the parent company, as the bonds issued are backed by the assets transferred to the SPV, not the parent company's balance sheet.
- Fixed-Rate Bonds: Debt securities issued by a company where the interest rate on the bonds remains constant throughout the bond's life. This contrasts with floating rate bonds, where the interest rate can fluctuate based on market conditions or an underlying benchmark rate.