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Capital Markets

Dunkin' Brands sets new mark for buyout securitization; Largest US IPO of the year; Ferrovial buys BAA

Deal digest: IFLR. Paul Weiss Rifkind Wharton & Garrison and Ropes & Gray were lead counsel on the first securitization of franchise rights to be used as financing for a corporate takeover.

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Dunkin' Brands sets new mark for buyout securitization

Paul Weiss Rifkind Wharton & Garrison and Ropes & Gray were lead counsel on the first securitization of franchise rights to be used as financing for a corporate takeover.

Dunkin' Brands raised $1.7 billion by securitizing assets of its franchises in fast food chains Dunkin' Donuts, Baskin-Robbins and Togo's. The triple-A rated offer, sold under Rule 144A, included $1.5 billion in senior notes backed by Ambac Assurance.

The money raised was used in the $2.4 billion acquisition of Dunkin' Brands by a consortium of three private equity firms, the Carlyle Group, Thomas H Lee Partners and Bain Capital. Paul Weiss advised underwriter Lehman Brothers on the deal. Ropes & Gray acted for Dunkin' Brands, and Cadwalader Wickersham & Taft represented Ambac.

The Dunkin' Brands deal marks the latest step in the growing use of securitization as a means of financing acquisitions. A private equity consortium securitized car rental receivables in its $15 billion buyout of Hertz from Ford. The Dunkin' deal, however, is the first time a buyer has securitized franchise royalty payments, intellectual property, leases and other licensing receivables.

Securitization offers cheaper financing costs than traditional debt or bank financings, particularly for companies with weaker credit ratings. Securitizations are more complex and time-consuming, however, which can limit their usefulness in a buyout if the bidder has to move quickly or is in an auction.

Financial institutions have tried to import UK-style whole business products for years, and have looked to franchise deals as one way to get close to the structure. Jordan Yarett, the Paul Weiss partner who led the team advising Lehman Brothers, described the Dunkin' Brands deal as being as close to a whole business securitization as is possible under US law.


Equity capital markets

Simpson Thacher & Bartlett and Cleary Gottlieb Steen & Hamilton were outside counsel on the biggest US IPO of the year so far. Credit card operator Mastercard raised $2.4 billion when it listed on the NYSE. Vincent Pagano and Joshua Ford Bonnie led for Simpson Thacher, which represented Mastercard. Cleary Gottlieb's David Lopez was adviser to the underwriters Goldman Sachs.

Davis Polk & Wardwell and Cleary Gottlieb Steen & Hamilton advised on the initial public offering (IPO) of Burger King. The offering, which raised $425 million, saw the fast food chain list on the New York Stock Exchange (NYSE). Jeffrey Small and Deanna Kirkpatrick of Davis Polk advised the issuer, while William Gorin of Cleary Gottlieb acted for the underwriters, led by Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley.

Shearman & Sterling and Cravath Swaine & Moore helped take internet telephone service provider Vonage public. The New Jersey company, which offers broadband voice over internet protocol services, raised $531 million through its IPO. Shearman & Sterling represented Vonage, while Cravath Swaine & Moore acted for the underwriters, Citigroup, Deutsche Bank and UBS. Bingham McCutchen advised the company on regulatory issues.

The Greek government has completed the IPO of Postal Savings Bank. The offering raised €550 million and included a Rule 144A and Regulation S tranche and placement to Postal Savings employees. Davis Polk & Wardwell advised the lead managers with Paul Kumleben leading the team. Allen & Overy represented Postal Savings Bank and the Greek government on US law. Greek law advisers were Karatzas & Partners, for the lead managers, and Kyriakides Georgopoulos & Daniolos Issaias, for the company.

Rayong Refinery raised $720 million in Thailand's third biggest IPO. Underwriters Merrill Lynch, Morgan Stanley, Phatra Securities and Finansa Securities were represented by Norton Rose's Bangkok office. Suparerk Auychai led the Norton Rose team while Rayong Refinery was represented by White & Case. Shearman & Sterling advised Merrill Lynch and Morgan Stanley on the Rule 144A and Regulation S aspects of the offering.

Allen & Overy, Freshfields Bruckhaus Deringer and Shearman & Sterling scored roles on Bank of China's record $11 billion IPO and Hong Kong stock exchange listing. The IPO is the biggest by an Asian issuer and the sixth largest in the world. Bank of China was advised by Ng Kay Ian of Freshfields. Beijing partner Alan Seem led the Shearman team as US counsel to the lead underwriters Bank of China International, Goldman Sachs and UBS. Allen & Overy's Michael Liu acted as Hong Kong counsel to the underwriters.

Mergers and acquisitions Sullivan & Cromwell and Wachtell Lipton Rosen & Katz advised on the $10 billion merger of US banks Regions Financial and AmSouth Bancorporation. The tie-up will create a financial institution operating across the southern US with almost 2,000 branches. Wachtell Lipton's Edward Herlihy and Lawrence Makow advised Regions Financial on the deal. Rodgin Cohen and Mitchell Eitel of Sullivan & Cromwell represented AmSouth.

Five law firms advised on the proposed buyout of Kinder Morgan. A group of investors led by chairman Richard Kinder offered to buy the company in a $22 billion deal. The transaction would be one of the biggest management buyouts in US history. Weil Gotshal & Manges advised Richard Kinder and members of the management team through partners James Westra and Jay Tabor. Wachtell Lipton Rosen & Katz represented consortium member Goldman Sachs, with Davis Polk & Wardwell advising AIG Financial Products and Latham & Watkins acting for the Carlyle Group and Riverstone Holdings. Skadden Arps Slate Meagher & Flom advised a committee of Kinder Morgan directors set up to consider the offer.

Spanish construction group Ferrovial was the winning bidder for UK airport operator BAA. The £10.1 billion ($18.5 billion) deal follows an auction involving Ferrovial and a Goldman Sachs consortium. Caisse de Dépôt et Placement du Québec and GIC Special Investments are the other members of Ferrovial's consortium. Freshfields Bruckhaus Deringer, through lead partner Laurie McFadden, is acting for Ferrovial. Herbert Smith is representing BAA with Allen & Overy's Boyan Wells providing BAA with finance advice. Slaughter and May is acting for Citigroup as financial adviser. Ferrovial consortium members Caisse de Dépôt et Placement du Québec and GIC Special Investments are being advised by Fasken Martineau's Jim Lisson and O'Melveny & Myers partner Chris Ashworth respectively. Ashurst was advising Goldman Sachs.

In another UK infrastructure deal, Freshfields Bruckhaus Deringer is advising a Goldman Sachs-led consortium on its bid for UK ports operator Associated British Ports. Clifford Chance is advising a rival consortium led by Macquarie on the £2.58 billion bid. Partners David Higgins and Edward Braham lead the Freshfields team while Ian Bagshaw heads the Clifford Chance team. Slaughter and May's Richard de Carle is advising Associated British Ports and O'Melveny & Myers' Chris Ashworth is again advising GIC Special Investments, this time as part of the Goldman consortium.

Private equity firm Charterhouse Capital has completed the £460 million sale of baby feeding products company Avent to Netherlands company Royal Philips Electronics. The Allen & Overy team advising Charterhouse is led by private equity partner, Derek Baird. Sullivan & Cromwell's Craig Jones acted for Royal Philips while Travers Smith, through Charlie Barter and Paul Dolman, acted for the management sellers.

Paul Hastings Janofsky & Walker advised Wal-Mart on the sale of its Korean retail business to Shinsegae for KrW825 billion ($859 million). The Paul Hastings team was led by Jong Han Kim, Neil Torpey and Daniel Kim in Hong Kong. Shin & Kim were retained as Korean counsel to Wal-Mart and Woo Yun Kang Jeong & Han advised the purchaser on matters of Korean law.

Debt capital markets Deutsche Bank, BNP Paribas, Calyon and Société Générale were initial purchasers of Europcar Groupe's high yield bond offering. The €550 million bond is being used to part-fund private equity group Eurazeo's March 2006 acquisition of Europcar from Volkswagen. White & Case advised the initial purchasers with London partner Rob Matthews leading the team. Gide Loyrette Nouel acted for the company and Ashurst acted for the trustee.

Goldman Sachs arranged a £350 million payment-in-kind facility for UK retailer New Look. Allen & Overy leveraged finance partner Andrew Bamber advised Goldman Sachs on the deal. Simpson Thacher advised New Look. The deal follows the acquisition of New Look two years ago by private equity funds Apax and Permira.

Belgian chemical and pharmaceutical company Solvay issued a €500 million hybrid bond. Clifford Chance advised structuring adviser and joint bookrunner Deutsche Bank on the deal. Freshfields Bruckhaus Deringer advised the company with Paris finance partner Antonin Besse leading the team. The deeply subordinated bonds obtained the highest credit rating yet for a corporate hybrid and qualified for 50% equity treatment from Moody's. The Clifford Chance team included Cedric Burford and Jean-Baptiste de Martigny.

Herbert Smith acted on Taiwan's first convertible bond issue of the year. Integrated circuit device manufacturer Winbond Electronics issued $120 million in five-year zero coupon convertible bonds. The Herbert Smith team advising coordinator Goldman Sachs included Hong Kong partners John Moore and Paul Lee. Tsar & Tsai advised Goldman Sachs on matters of ROC law while Lee and Li acted as Taiwanese counsel to the issuer.

Restructuring UK restaurant group Tragus has completed its £138 million debt refinancing. Ashurst advised Tragus Group, which restructured senior and mezzanine facilities allowing Tragus to repay £88 million of existing debt. Tragus owns the Café Rouge and Bella Italia restaurant chains and is backed by Legal & General Ventures. Corporate partner Bruce Hanton led the Ashurst team advising the company while DLA Piper Rudnick Gray Cary's John Cutler acted for Barclays Bank.

Banking Asia Aluminum completed a management buyout financed by $535 million senior payment-in-kind notes and warrants. Davis Polk & Wardwell advised Merrill Lynch as financial adviser to Asia Aluminum. Management was represented by Sidley Austin, Linklaters and Conyers Dill & Pearman on US, Hong Kong and Bermuda law respectively. Investor groups were advised separately by Skadden Arps Slate Meagher & Flom and Slaughter and May.

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