Subway suitors lining up financing

Subway's remaining suitors are lining up financing as the shifting deadline for second-round bids approaches, a source familiar with the situation tells Axios.

Why it matters: It won't be easy putting together a multibillion-dollar debt package to back a turnaround play at a time when financing is difficult to come by.

Catch up fast: Axios reported last week that bidders, which include PE firm Roark Capital, eschewed the staple financing offered by Subway's investment bank JPMorgan.

Details: Instead, PE firms competing for the sandwich chain are exploring alternative financing coined whole-business securitization, as reported by Bloomberg and Reuters and confirmed by Axios.

• The asset-backed debt instrument could be up to $3 billion, with another $2 billion in bonds and loans, likely syndicated.
• The $5 billion in total financing would give Subway leverage of over 6x earnings.
• The winning offer is likely to range between $9 billion and $10 billion, and the deal is expected to be completed sometime in July.

Of note: Roark Capital has utilized whole business securitization financing on multiple occasions over the years, including for Dunkin' Brands' parent, Inspire Brands, and Driven Brands.

Zoom in: With a whole-business securitization, all of the borrower's assets, including royalties and intellectual property, are in essence mortgaged, per Bloomberg.

• But it's cheaper than bonds and loans.