Driven Brands Closes $275 Million Securitization Issuance to Refinance Existing Debt

Rhea-AI Summary

Driven Brands Holdings Inc. (NASDAQ: DRVN) has successfully closed a $275 million securitization issuance of Series 2024-1 Fixed Rate Senior Secured Notes, Class A-2. The notes, maturing in October 2054 with an anticipated repayment date in October 2031, were priced at a 6.372% coupon. The proceeds will refinance existing debt, cover transaction fees, and support general corporate purposes. Additionally, Driven Brands increased its Variable Funding Notes capacity by $400 million through Series 2024-1 Class A-1 Notes.

This marks Driven Brands' eleventh whole business securitization issuance. Both note series received ratings of BBB from Kroll Bond Rating Agency and BBB- from S&P Global Ratings. The offering was made to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S.

Positive

• Successful closure of $275 million securitization issuance
• Increased Variable Funding Notes capacity by $400 million
• Consistent BBB/BBB- ratings from Kroll and S&P Global for the new notes
• Refinancing of existing debt potentially improving financial structure

Negative

• 6.372% coupon rate on new notes may increase interest expenses

Insights

Financial Analyst

Driven Brands' $275 million securitization issuance marks a significant financial maneuver, reflecting the company's proactive approach to debt management. The new A-2 Notes, priced at a 6.372% coupon with a seven-year tenor, suggest a strategic refinancing effort aimed at optimizing the company's capital structure.

Key points to consider:

• The BBB/BBB- ratings from Kroll and S&P, respectively, indicate a relatively stable credit profile, which is important for investor confidence.
• The increased capacity of the Variable Funding Notes to $400 million provides Driven Brands with enhanced financial flexibility, potentially supporting future growth initiatives or serving as a liquidity cushion.
• The whole business securitization structure, now in its eleventh iteration, demonstrates the company's adeptness at leveraging its diverse portfolio of automotive service brands to access capital markets efficiently.

While the refinancing may lead to short-term costs, the long-term benefits could include reduced interest expenses and an extended debt maturity profile. Investors should monitor how management utilizes this financial maneuverability to drive growth and operational improvements across its extensive network of 5,000+ locations.

Market Research Analyst

Driven Brands' latest financial move offers intriguing insights into the automotive services sector's dynamics. With system-wide sales of approximately $6.4 billion and annual revenue of $2.3 billion, the company's scale in North America is impressive. This securitization issuance underscores several market trends:

• Consolidation in fragmented markets: Driven Brands' portfolio of well-known service providers suggests ongoing consolidation in the automotive aftermarket, which has traditionally been fragmented.
• Resilience of automotive services: The company's ability to service approximately 70 million vehicles annually indicates the sector's resilience, even in challenging economic environments.
• Diversification as a strength: The range of services offered, from oil changes to collision repair, provides a hedge against fluctuations in specific automotive service segments.

The successful securitization also hints at investor confidence in the automotive services sector's stability and growth potential. As vehicle complexity increases and average vehicle age rises in North America, companies like Driven Brands are well-positioned to capitalize on the growing demand for professional automotive services.

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Driven Brands Holdings Inc. (“Driven Brands” or the “Company”) (NASDAQ: DRVN) announced today that it has closed an offering by certain of its subsidiaries for $275 million of Series 2024-1 Fixed Rate Senior Secured Notes, Class A-2 (the “A-2 Notes”) maturing October 2054 and with an anticipated repayment date in October 2031. The proceeds from the issuance will be used to refinance the Company’s Series 2018-1 Class A-2 Fixed Rate Senior Secured Notes, to pay transaction-related fees and expenses and for general corporate purposes.

In addition, Driven Brands increased the total capacity under its Variable Funding Notes through the addition of $400 million of Series 2024-1 Class A-1 Notes (the “A-1 Notes”), which refinanced the undrawn $135 million Series 2019-3 Class A-1 Notes. The A-1 Notes were undrawn as of closing.

This transaction was structured as a whole business securitization through Driven Brands Funding, LLC and Driven Brands Canada Funding Corporation and represents Driven Brands’ eleventh whole business securitization issuance. The A-2 Notes were priced at a coupon of 6.372% and have a seven-year tenor through the anticipated repayment date.

The A-1 Notes and A-2 Notes each received ratings of BBB from Kroll Bond Rating Agency and BBB- from S&P Global Ratings, consistent with the Series 2022-1 Fixed Rate Senior Secured Notes, Class A-2, that closed in October 2022.

The A-2 Notes are not registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from, or a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The A-2 Notes were offered only to qualified institutional buyers under Rule 144A and to persons outside the United States pursuant to Regulation S under the Securities Act. This press release is not an offer to sell, nor a solicitation of an offer to buy, any securities, nor shall there be any sale of these securities in any state or jurisdiction in which the offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

Driven Brands™, headquartered in Charlotte, NC, is the largest automotive services company in North America, providing a range of consumer and commercial automotive needs, including paint, collision, glass, vehicle repair, oil change, maintenance and car wash. Driven Brands is the parent company of some of North America’s leading automotive service businesses including Take 5 Oil Change®, Take 5 Car Wash®, Meineke Car Care Centers®, Maaco®, 1-800-Radiator & A/C®, Auto Glass Now®, and CARSTAR®. Driven Brands has more than 5,000 locations across 13 countries, and services approximately 70 million vehicles annually. Driven Brands’ network generates approximately $2.3 billion in annual revenue from approximately $6.4 billion in system-wide sales.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240729559397/en/

Shareholder/Analyst inquiries:

Dawn Francfort

ICR, Inc.

investors@drivenbrands.com

(203) 682-8200



Media inquiries:

Taylor Blanchard

taylor.blanchard@drivenbrands.com

(704) 644-8129

Source: Driven Brands

FAQ

What is the size of Driven Brands' (DRVN) recent securitization issuance?

Driven Brands (DRVN) closed a $275 million securitization issuance of Series 2024-1 Fixed Rate Senior Secured Notes, Class A-2.

What is the coupon rate for Driven Brands' (DRVN) new Series 2024-1 Class A-2 Notes?

The Series 2024-1 Class A-2 Notes issued by Driven Brands (DRVN) were priced at a coupon of 6.372%.

How much did Driven Brands (DRVN) increase its Variable Funding Notes capacity?

Driven Brands (DRVN) increased its Variable Funding Notes capacity by $400 million through the addition of Series 2024-1 Class A-1 Notes.

What ratings did Driven Brands' (DRVN) new notes receive?

The new notes issued by Driven Brands (DRVN) received ratings of BBB from Kroll Bond Rating Agency and BBB- from S&P Global Ratings.