How will the bankruptcy filings of TGI Fridays and Hooters affect the market for securitizations?

This week’s episode of the Restaurant Business podcast A Deeper Dive features Ed Cerullo, a credit analyst with Octus, to talk about whole business securitizations and the potential impact those bankruptcies can have on the market. 

Whole business securitizations use a company’s cash-generating assets to back bonds. Cerullo helps explain how they work, and why they’ve been so popular in the restaurant industry over the past 15-plus years. 

TGI Fridays was the first bankruptcy of a restaurant chain that used a whole business securitization, and Hooters was the second. Fridays also has the distinction of having lost control of its assets, the first time that had happened in any industry in 15 years. 

Both were risky investments, however, at the time they went to the securitization market. Cerullo and I talk about that, and whether the investments properly denoted the risks those companies presented at the time. We talk about whether the securitizations promoted this risk, and what the impact will be on the market going forward.