Bertrand Franchise (BGRKNG; Snr Secured; exp. B2/B) Mandate

€1.15b; 6NC1 FRN & 6NC2 FIXED. S&P's rated the issuer and secured new debt at single B stable. Tough co to price, Avis 30s (Sr Unsec; B1/BB-) far from asset light but has similar call structure & mgmt targeting ratings here. It prices to par call in '28 and trades at 7.4%. Couple of close comps but Avis already under coverage hence the reference, FV we will follow with if we have a firm view on.

• Co operates 8 brands including Burger King (BK) France, Itsu France & Leon. BK France is 2nd largest quick service hamburger restaurant in the country and 2nd largest country exposure for BK globally. It generated €253m/83% of the group's EBITDA. S&P doesn't see issue with outsized single brand exposure, noting expected growth in the 7 other brands & the opportunity for BK to expand (it says 1/3 of the locations McDonald's has in France which co has echoed in roadshow). Out of the 7 others, Bertrand owns 6.
• On financials co is asset light with 85% franchised. Revenues last year at €1b, runs a 29% EBITDA margin and 81% cash conversion on that. BK holds up margins; 35% vs. other 7 brands at 18%. Similar franchise rates across both (low to mid 80s) & runs higher margins on these (~50%) from the lower operating costs. Margins look little changed over recent years and flat from pre-covid levels for BK.
• Ratings more reflect leverage which it runs at gross around 6.2x (incl. leases) than operating metrics above. It has pro-forma net leverage at 5.7x (up from 5.3x) which is low vs. recent years (6-8x range) - S&P notes owners tolerance for high leverage as well & uncertainty on how ongoing acquisitions are integrated. Co says "disciplined approach to M&A" but gives no leverage targets. It has a 'no dividend' policy.
• Worth noting €800m of the total €2b in debt is leases; S&P notes it subleases "sizable portion" of franchisee rents which it has struggled to adjust for directly given lack of company reporting - takes some pressure of the 6x leverage we see.