Arcos Dorados Announces Pricing of Its 6.375% Senior Notes Due 2032

Rhea-AI Summary

Arcos Dorados Holdings Inc. (NYSE: ARCO) has announced the pricing of $600 million in senior notes through its subsidiary Arcos Dorados B.V. The notes, priced at 99.583%, will carry a 6.375% interest rate and mature on January 29, 2032.

The notes will be guaranteed on a senior unsecured basis by the Company and certain subsidiaries. The offering is being made through private placement to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S of the Securities Act.

The settlement is expected on January 29, 2025. Proceeds will be used to fund a tender offer to purchase all outstanding 5.875% senior notes due 2027 and for general corporate purposes.

Positive

• Successful pricing of $600 million senior notes offering
• Strong institutional investor interest in private placement
• Refinancing of existing debt with longer maturity (2032)

Negative

• Higher interest rate on new notes (6.375%) compared to existing notes (5.875%)
• Slight discount on issue price (99.583%) represents additional cost

Insights

Fixed Income Analyst

The $600 million senior notes issuance by Arcos Dorados represents a significant debt restructuring that merits careful analysis. The new 6.375% coupon rate, replacing the existing 5.875% 2027 notes, reflects both current market conditions and the company's credit profile as Latin America's largest McDonald's franchisee.

The 50 basis point increase in interest rate will impact annual interest expenses by approximately $3 million. However, this refinancing provides several strategic advantages:

• Extended maturity profile by 5 years to 2032, reducing near-term refinancing risk
• Maintained investment-grade-like structure with senior unsecured status
• Strong institutional investor demand evidenced by successful private placement
• Pricing at 99.583% of par indicates robust market acceptance

The timing of this refinancing is strategic, as it addresses upcoming 2027 maturities well in advance, providing financial flexibility during a period of global economic uncertainty. The slight premium to the existing notes' coupon reflects both the extended duration and the current higher interest rate environment.

For quick-service restaurant operators in Latin America, this successful bond issuance demonstrates continued access to international capital markets, despite regional economic challenges. The pricing suggests investors remain confident in Arcos Dorados' business model and market position as a leading McDonald's franchisee.

MONTEVIDEO, Uruguay--(BUSINESS WIRE)-- Arcos Dorados Holdings Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”) today announced the pricing of U.S.$600,000,000 aggregate principal amount of 6.375% Senior Notes due 2032 (the “Notes”) to be issued by its subsidiary Arcos Dorados B.V. (the “Issuer”). The Notes will be issued at a price of 99.583%. The Notes mature on January 29, 2032 and will be guaranteed on a senior unsecured basis by the Company and certain of the Company’s subsidiaries. The Notes were offered in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons in accordance with Regulation S under the Securities Act. The settlement of the Notes offering is expected to take place on January 29, 2025, subject to customary closing conditions.

The proceeds from the Notes offering will be used by the Issuer: (i) to fund the tender offer conducted by the Company to purchase for cash any and all of its outstanding 5.875% senior notes due 2027, and (ii) for general corporate purposes.

This press release does not constitute an offer to sell or a solicitation of an offer to buy these securities, nor will there be any sale of these securities, in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state or jurisdiction. The Notes and related guarantees have not been registered under the Securities Act, or any applicable state securities laws, and will be offered only to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act and outside the United States to non-U.S. persons in accordance with Regulation S under the Securities Act. Unless so registered, the Notes and related guarantees may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and any applicable state securities laws.

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About Arcos Dorados

Arcos Dorados is the world’s largest independent McDonald’s franchisee, operating in Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories with more than 2,400 restaurants, operated or franchised by the Company or by its sub-franchisees, that together employ more than 100,000 people (as of 09/30/2024). The Company is also committed to the development of the communities in which it operates, to providing young people their first formal job opportunities and to utilize its Recipe for the Future to achieve a positive environmental impact. Arcos Dorados is listed for trading on the New York Stock Exchange (NYSE: ARCO). To learn more about the Company, please visit the Investors section of our website: www.arcosdorados.com/ir.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often are proceeded by words such as “believes,” “expects,” “may,” “anticipates,” “plans,” “intends,” “assumes,” “will” or similar expressions. The forward-looking statements contained herein include statements about the Company’s Notes offering and its intended use of proceeds therefrom. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, Arcos Dorados’ business and operations involve numerous risks and uncertainties, many of which are beyond the control of Arcos Dorados, which could result in Arcos Dorados’ expectations not being realized or otherwise materially affect the financial condition, results of operations and cash flows of Arcos Dorados. Some of the factors that could cause future results to materially differ from recent results or those projected in forward-looking statements are described in Arcos Dorados’ filings with the United States Securities and Exchange Commission.

The forward-looking statements are made only as of the date hereof, and Arcos Dorados does not undertake any obligation to (and expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events. In light of the risks and uncertainties described above, and the potential for variation of actual results from the assumptions on which certain of such forward-looking statements are based, investors should keep in mind that the results, events or developments disclosed in any forward-looking statement made in this document may not occur, and that actual results may vary materially from those described herein, including those described as anticipated, expected, targeted, projected or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250124425743/en/

Investor Relations Contact

Dan Schleiniger

VP of Investor Relations

Arcos Dorados

daniel.schleiniger@mcd.com.uy

Media Contact

David Grinberg

VP of Corporate Communications

Arcos Dorados

david.grinberg@mcd.com.uy

Source: Arcos Dorados Holdings Inc.

FAQ

What is the interest rate and maturity of ARCO's new senior notes?

The new senior notes have a 6.375% interest rate and will mature on January 29, 2032.

How much is ARCO's new senior notes offering worth?

Arcos Dorados is offering $600 million in aggregate principal amount of senior notes.

What will ARCO use the proceeds from the 2032 notes for?

The proceeds will be used to fund a tender offer for existing 5.875% senior notes due 2027 and for general corporate purposes.

When is the settlement date for ARCO's 2032 senior notes?

The settlement of the notes offering is expected to take place on January 29, 2025.

What is the issue price of ARCO's 2032 senior notes?

The notes will be issued at a price of 99.583% of face value.