Transaction First to Digitize Rated Asset-Backed Security on Ethereum
Cadence Group, Inc., a leading fintech securitization platform, is pleased to announce the closing of a $40-million whole business securitization with FAT Brands Inc., in which Cadence acted as the sole structuring consultant and arranger.
In addition to significantly lowering FAT Brands’ marginal cost of capital to 7.75% and decreasing their interest expense by more than $2 million per year, the transaction highlighted Cadence’s ability to efficiently securitize restaurant franchise royalty assets for innovative franchisors gearing up for growth.
“We’re incredibly proud of the entire working group’s efforts on this ground-breaking transaction. The attractive relative value offered via a shorter duration whole business securitization structure was received extremely well, particularly given the current macroeconomic backdrop,” said Prath Reddy, Head of Capital Markets at Cadence. “We look forward to working with more trailblazing companies like FAT Brands and successfully bringing them to market as first time ABS issuers.”
Cadence’s experience with digital assets also proved to be crucial, as FAT’s Series 2020-1, rated by DBRS Morningstar, marked the first time a public rating has been assigned in connection with a digitized asset-backed security. Using ERC-20 tokens, each of the note’s two tranches will have a reflective digital asset created that will show anonymized ownership, as well as subsequent cash flows related to the transaction.
“This is a testament to our ability to provide a holistic securitization solution for underserved yet opportunistic segments of the market. The work we did for FAT Brands is laying the foundation for a future where securitization will be on chain from start to finish,” said Nelson Chu, Founder & CEO of Cadence.
Founded in 2018, Cadence has positioned itself at the forefront of industry trends. Its retail investment platform for accredited investors has seen a surge in growth since going live in July 2019. More than $75 million in notes have been issued across 65+ offerings and 12 originators. To date, the company has paid out over $1 million in interest and experienced $0 defaults.
“What we’re accomplishing as such a young company in a space dominated by incumbent banks and investment managers is already truly unprecedented,” Chu said. “And this is just the beginning.”
Manatt, Phelps & Phillips, LLP served as advisors for Cadence on the transaction, while UMB Bank, N.A. acted as Trustee, Vervent, Inc. as Backup Manager, and Citadel SPV LLC as Control Party.