Dunkin’ announced Monday that the lead underwriters in the company’s recent IPO plan to waive the lock-up restriction for up to 732,758 shares held by 15 executives, former executives and directors at the company. Bain was one of three private equity firms that invested in Dunkin’ before the company’s IPO.

The shares, worth about $19 million at Friday’s closing price, amount to about 0.6 percent of the company’s 120.1 million shares.

The officers and directors at the company who will see the IPO lock-up waived include:
Nigel Travis, CEO of Dunkin Brands and president of Dunkin’ Donuts U.S.
Neil Moses, CFO Dunkin’ Brands.
John Costello, chief global marketing and innovation officer.
Richard Emmett, svp and general counsel.
Kate Lavelle, former Dunkin’ Donuts CFO.
Paul Twohig, COO Dunkin’ Donuts U.S.
Jon Luther, former Dunkin’ CEO.
Todd Abbrecht, Managing Director at Thomas H. Lee Partners  .. .
Andrew Balson, Managing Director at Bain Capital Partners, LLC.
Anita Balaji, Vice President at The Carlyle Group  .. .
Anthony DiNovi, Co-President of Thomas H. Lee Partners.
Sandra Horbach, Managing Director of The Carlyle Group.
Michael Hines, Board member.
Mark Nunnelly, Managing Director at Bain Capital Partners, LLC.
Joseph Uva, board member and former president and CEO of Univision Communications Inc.

Earlier this month Dunkin’ reported that third quarter sales were up, but income dropped. The firm also said on Nov. 1 that it would offer 22 million shares of its common stock for sale in a secondary offering.

Read more at: Boston Business Journal

Other Related stories: Dunkin’ Brands Announces Waiver of IPO Lock-Up Restriction for Certain Officers and Directors

Banks, including Barclays, JPMorgan Chase, Bank of America Merrill Lynch and Goldman Sachs, have previously provided financing to the company. Dunkin’ Brands is backed by private equity firms, including Bain Capital, Carlyle Group and Thomas H Lee Partners.

Click here for the story from Reuters.

The presentation is titled: The Franchisor In Play: Your Role as a Stakeholder, Not a Spectator

Eric made this same presentation at DDIFO’s National Members Meeting. For more information read: Franchisees as Stakeholders Your Rightful Claim  

Reuters Breaking Views

The buyout barons behind Dunkin’ Donuts are taking out some dough. Nearly five years on from one of the era’s most aggressive leveraged buyouts, Bain Capital, Carlyle Group and Thomas H. Lee Partners are hiking up debt on Dunkin’ Brands, which owns the doughnut chain and ice cream retailer Baskin-Robbins, taking out a $500 million dividend in the process. Equity holders may get a short-term buzz, but debt investors should beware.

The refinancing will leave Dunkin’ with a debt-to-EBITDA ratio of more than 7 times, a heavy burden even in the best of circumstances.

True, it’s a lighter load than the original LBO leverage level of 8.5 times, when the private equity trio bought out the company for $2.4 billion. But these are different times, and banks and investors are supposed to have learned the dangers of too much leverage.

Dunkin’s new debt holders probably take comfort in the fact that the firm managed the most severe recession in memory loaded up with debt. It grew its franchise numbers by 3.7 percent during 2009, and spent this year adding even more. Sales are up as well.

Those figures, however, are a slow-down from Dunkin’s impressive growth between 2006 and 2008, when the private equity owners initially polished Dunkin’ Donuts’ image and pushed into coffee. It’s questionable whether similar rates of growth can be achieved again.

Read the full opinion at Reuters

For related stories see:  Moody’s Bites into Dunkin’ Brands

Dunkin’ Taps Junk Rally to Fund Private Equity Payout

Executives of donut retailer Dunkin Brands, drive-in restaurateur Sonic and car-rental firm Hertz, all of which issued Ambac-insured bonds, filed affidavits in support of Wisconsin Insurance Commissioner Sean Dilweg’s motion in state court yesterday opposing the legal bids by two groups of bondholders. Opponents of his plan said it would favor banks who bought default protection on one type of mortgage security.

“Aside from being factually wrong” in their allegations about the plan, Dilweg’s challengers should be turned aside because the commissioner “has broad discretion to decide how to best to protect policyholders and the public from the grave risks posed by Ambac’s deteriorating condition,” the department’s lawyers at Foley & Lardner LLP said in the filing.

Two months ago Dilweg forced New York-based Ambac’s insurance unit to split in two after its capital was depleted by projected losses on collateralized debt obligations tied to subprime mortgages, halting payments on $35 billion of other mortgage bond policies and additional contracts.

At the same time, Ambac reached a tentative agreement to pay $2.6 billion in cash and $2 billion of surplus notes to banks holding $16.5 billion of insurance on CDOs that was left in its main account. Surplus notes can be paid if the company has enough capital at some later point in time.

‘Substantial Collateral Damage’

“A rehabilitation of Ambac in its entirety could have substantial collateral damage in several facets of Ambac’s business,” Roger A. Peterson, a director in Wisconsin’s office of the commissioner of insurance, said in the filing. That could include requirements for borrowers such as Dunkin Brands to make accelerated payments on certain debt if Ambac were seized completely, he said.

Dunkin Brands Chief Financial Officer Kate Lavelle said in an affidavit that a failure of Ambac would result in a “very substantial restriction of operational cash available to” the donut company because of agreements related to a $1.5 billion “whole business securitization.”

The filing by the insurance department of Wisconsin, where Ambac’s insurance unit is based, also included affidavits by Sonic CFO Stephen C. Vaughn and Hertz Corp. Treasurer R. Scott Massengill.

Opposed to Plan

Policyholders seeking to block Dilweg’s plan include owners of residential mortgage-backed securities such as hedge fund firms Aurelius Capital Management and Fir Tree Partners and holders of Las Vegas Monorail Co. municipal debt such as mutual fund manager Eaton Vance Corp. The RMBS holders would receive 25 cents on the dollar in cash for their claims and the rest in surplus notes under his plan.

Their argument that they would get less than CDO holders isn’t accurate because the CDO settlement offers between 35.8 percent and 54.4 percent of projected claims, while mortgage- bond claims would be paid in their entirety, as they arise, when considering the surplus notes they would also receive, the department said, citing an analysis by BlackRock Inc.

CDOs package pools of assets such as mortgage bonds or high-yield company loans into new securities with varying risks.

Read more at: BusinessWeek

The private equity business is one of a handful of segments of the financial markets that isn’t emerging as a major focus for reform among Washington policymakers. True, there has been some discussion about taxing the industry’s profits at a higher rate, which is moving forward in the House in a proposal by Senator Carl Levin and Senator Max Baucus. But compared with the historic bank regulation that the Senate passed on Thursday, private equity funds and their managers have escaped the populist storm relatively unscathed, even if they will spend much of the next five years trying to refinance hundreds of billions of dollars of debt in a more difficult environment.

The probable reason for this relative immunity is that in their dealings with Wall Street investment banks, it’s more probable that it was the private equity world that took advantage of investment banks like Citigroup or Morgan Stanley rather than the other way around.

Indeed, within investment-banking circles, the biggest buyout shops—Blackstone, KKR, and Apollo—earned a reputation for playing one investment bank against another in quest of the cheapest and largest financing packages. At one point during the height of the frenzy, bankers at Citigroup were trying to find ways to finance a $85 billion buyout, several times the largest such deal ever done, on behalf of one of its clients. “We might have temporarily lost our minds,” admitted one of the bankers involved, after the fact. “But at the time, we knew we couldn’t afford to lose the client’s loyalty.”

Still, just because the private equity business seems to have manipulated Wall Street rather than the other way around doesn’t mean that it should be immune to scrutiny. True, its investors are sophisticated entities—pension funds, college and university endowments, and foundations. Many of them may have been encouraged by the success of early players like Yale’s David Swenson (and the latter’s loud cheerleading for such alternative asset classes) into committing extremely large chunks of their portfolios to the relatively illiquid private equity arena. The appeal was easy enough to understand. At the height of the private equity boom, top quartile firms generated an annualized return of 39 percent, according to the Private Equity Council, an industry group.

A survey last year by Prequin calculated that two out of every five of the largest endowments have allowed or encouraged their allocations to private equity to exceed their targets, signaling a dangerous lack of discipline on the part of those institutions. But that wasn’t because Wall Street misinformed or concealed the true nature of the risks or return characteristics of private equity from these investors, as numerous legal actions now claim was how Main Street homeowners ended up refinancing their homes with toxic mortgages or German banks invested in CDOs.

On the contrary, the terms of the deals being struck by buyout funds at the height of the bubble often were spelled out in newspaper headlines. It was all too clear that these often involved miniscule amounts of equity investment and massive debt loads.

It’s not surprising that those chickens are coming home to roost. In March, Moody’s Investors Service released a much-buzzed-about report, one that aroused the ire of the private equity world from the very first sentence: “Nearly half of U.S. nonfinancial corporates that defaulted in 2009 had private equity sponsors.”

In other words, those debt loads were making it difficult for the companies that had been buyout targets to function and repay that debt in a recessionary environment. One after another well-known companies filed for bankruptcy protection, staggering under the burden of debt loads applied to their operations by new private equity purchasers: Linens ‘n Things, Reader’s Digest Association, Tribune Co. (the publisher of Chicago’s broadsheet daily newspaper.) The bigger the buyout, the more perilous the outcome, Moody’s said, and the debt rating agency pointed to high correlations between low-rated debt issues and defaults, and between buyout-backed companies and low-rated debt issues.

The Moody’s report, coupled with others from the Boston Consulting Group and Standard & Poor’s—all suggesting that the pain isn’t yet at an end—have been met with furious ripostes from those inside the buyout world. The issue under debate appears to be the precise definition of a default: Moody’s lumps negotiated settlements and prepackaged bankruptcies into the default category, while other studies (including one sponsored by the Private Equity Council) argue that it’s inappropriate to include transactions in which bondholders received significant “recovery” levels on their investments.

That strikes StreetWise as debating over how many angels are capable of dancing a creditable flamenco atop the proverbial head of a pin. Rather than debating whether recovering 80 cents on the dollar means a bond didn’t technically default, the private equity industry might well start spending some time revisiting its basic model and questioning its relationships not with Wall Street (which will always bend over backwards to accommodate such lucrative clients) but with their own investors and the management of their portfolio companies they acquire.

Read more: http://www.portfolio.com/industry-news/banking-finance/2010/05/21/policing-private-equity-is-the-job-of-investors?ana=e_pft#ixzz0ojwGCjPP

CKE terminated a previous merger agreement with affiliates of Thomas H. Lee Partners LP, it said in a statement today. THL Partners, which owns a stake in Dunkin’ Brands Inc., had offered $11.05 a share.

CKE said on April 7 it had received a rival proposal from a then-unidentified bidder that may top the bid it had accepted from THL Partners in February. The acquisition by Apollo affiliate Columbia Lake Acquisition Holdings Inc. shows private equity firms are interested in restaurant chains because of their relatively low debt and good cash flow, said R.J. Hottovy, a restaurant analyst at Chicago-based Morningstar Inc.

Apollo spokesman Charles Zehren declined to comment. CKE spokeswoman Beth Mansfield and THL Partners spokesman Matt Benson didn’t return messages left after-hours at their offices.

CKE has 3,141 restaurants in 42 states and 14 countries, including 1,224 Carl’s Jr. restaurants and 1,905 Hardee’s sites. Founder Carl Karcher borrowed $311 to buy a Los Angeles hot-dog cart in 1941 and became a pioneer in the industry, introducing salad bars, char-broiled chicken-breast sandwiches and self- service beverage stations. He died in 2008.

Related reading at DDIFO.org: CKE Reastaurants Says New Takeover Bid is Better  

While the company didn’t name the mystery bidder, DealBook reported this month that the unnamed suitor was Apollo Management.

The news sent shares of CKE Restaurants up 82 cents, or 6.8 percent, to $12.81 in midday trading.

CKE said the $12.55 per share each stockholder would receive from the bidder was superior to a prior offer from Thomas H. Lee Partners, the buyout shop that was part of a consortium that bought Dunkin’ Brands in 2006.

CKE accepted Lee Partners’ offer of $11.05 a share in February. That offer includes about $619 million in cash and approximately $309 million in debt. But CKE said that it notified Lee Partners on Monday about the rival bid and that it planned to terminate its existing agreement based on what it felt was a superior proposal.

CKE is obligated by its existing deal with Lee Partners to talk to the firm for four business days about the offers in case Lee Partners wants to revise its bid. If a new agreement isn’t reached, CKE will send Lee Partners a notice that it is ending the existing deal in favor of the other bid.

 The New York Times

Other realted reading at DDIFO.org: CKE Has Better Offer From Apollo and Other Buyers Interested in CKE and Carl’s Jr. Owner CKE Bought by Thomas Lee Partners

CKE Restaurants Inc. said an unnamed party submitted a bid that may be superior to its current deal with Thomas H. Lee Partners, a Boston firm that’s among a trio of investment firms that bought Dunkin’ Brands Inc. in 2006.

The rival buyout offer received by CKE Restaurants Inc. this week was from private-equity firm Apollo Management, Reuters reported Thursday.

CKE, the Carpinteria, Calif.-based parent to the Carl’s Jr. and Hardee’s chains, has until April 27 to evaluate the new offer.

On Wednesday, CKE said it had received a buyout offer that may be better than the bid made in February by private-equity firm Thomas H. Lee Partners LP to buy the company for $928 million. THL’s offer includes the assumption of $309 million in debt and a per-share cash price of $11.05.

Read more: Nation’s Restaurant News

The news sent the company’s stock up 75 cents, or 7 percent, to $11.83 in premarket trading. The shares have traded between $7.60 and $11.57 over the last year.

CKE accepted Lee’s offer in February, which includes about $619 million in cash and approximately $309 million in debt.

Under terms of the deal, CKE shareholders would receive $11.05 in cash for each share they own.

CKE did not disclose many specifics about the new proposal, but said it can keep talking with the bidder until April 27 because of terms in the agreement with Thomas H. Lee. The bidder did not disclose how they would pay for the transaction.

CKE was allowed to seek alternative offers until Tuesday. Back in February the restaurant operator, based in Carpinteria, Calif., said it wouldn’t disclose any information related to its talks with other potential buyers — unless its board decided that a superior bid had been received.

Representatives for CKE and Thomas H. Lee couldn’t immediately be reached for a comment.

Business for CKE and many of its competitors slowed during the recession and kept some of its most loyal customers — young men — away from its restaurants.

CKE reported late last month that its fourth-quarter profit grew, but it was mostly due to a sizable tax benefit. The restaurant operator’s revenue fell nearly 5 percent during the quarter, while sales at stores open at least a year dropped 6 percent. This figure is considered a key performance indicator because it measures growth from existing locations rather than newly opened ones.

For the full year, CKE’s profit climbed 30 percent as annual revenue slipped 4 percent.

The company operates and franchises 3,141 restaurants in 42 states.

Other related reading at DDIFO.org: Carl’s Jr. Owner CKE Bought by Thomas H. Lee Partners  and Other buyers interested in CKE?