This week, the parent company of the popular food chain Fat Burger, Fat Brands, received a $40 million capital infusion. Importantly, the company raised the funds via tokenized securities. Company officials stated that the funding event was just one of many planned for the year, with the end goal of raising a total of $500 million.
Discussing the successful funding venture, President and CEO, Andrew Wiederhorn called the results “transformative” for the company. He went on to describe how the event represented an important milestone for the entire industry. Specifically, he described how there is a real demand from restaurant companies for access to the business securitization market to get capital, rather than seeking term loans.
Fat Burger Tokenization Strategy
Importantly, the security tokens utilized in this transaction are simply digital representations of ownership shares. As such, their transactions only occur outside of and parallel to securities transactions. Consequently, these transactions will not govern actual ownership of the notes.
The notes break down into two classes. Company officials explained that the first issuance included $20 million in Class A notes. These notes received a rating of BB by DBRS Morningstar. Also, $19.7 million in Class B notes were issued. Importantly, these notes were the first blockchain security to ever receive a rating from Morningstar.
Morningstar Rates Tokenized Securities for the 1st Time
Interestingly, Morningstar pointed out some of the benefits associated with tokenized securities. Specifically, the group cited faster access to data and increased transparency using the Ethereum-based protocol.
Investors in the Fat Brands tokenized securities receive a host of benefits. These benefits include a cut from all royalties and initial upfront fees charged to Fat Brands franchisees. Currently, the firm has over 400 stores in operations. Additionally, there are around 200 more scheduled to open in the coming months. These brands include Fat Burger, Buffalo’s wings and Ponderosa Steakhouse, to name a few.
Fat Burger – Cadence
In order to make this advantageous plan a reality, Fat Brands sought out the professional assistance of New York-based blockchain firm Cadence. For its part, Cadence would issue security tokens to all investors and record the transactions on the Ethereum blockchain.
Notably, this week was the first issuance of dividends. These payments came in three different tokens. Importantly, two token types represented tranches, whereas, the third was a US dollar-pegged stable coin called $CDG. In total, 80 million tokens were transferred to the respective transaction parties.
Fat Brand Funding
According to company executives, the firm earmarked $25 million to refinance existing debt. The move would benefit the company greatly with one estimate showing a yearly savings of $2 million. Also, any remaining funds will go to acquiring additional restaurant brands.
Fat Brand just opened the flood gates for all restaurants seeking access to more capital via the securities markets. You can expect to see the firm extend its services to interested parties in the coming weeks. For now, Fat Brands just made a power move in the market.
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