News

Jack in the Box chooses securitization over sale

May 16, 2019

Jack in the Box Inc. said today it won't sell but will enact a capital structure in the form of a securitization, concluding a previously announced initiative to look into ways to improve the company's value for shareholders, a news release said. 

The company's board and executive team worked with legal and financial advisors to investigate options including contacting potential buyers around the world and exploring financing alternatives, and the new capital structure through a securitization won out.

"With this evaluation behind us, we are dedicated to moving the Jack in the Box brand forward," Board Lead Director David Goebel said in the release. "The Board of Directors unanimously and wholeheartedly supports chairman and chief executive officer Lenny Comma and the entire management team as we collectively pursue a strategic plan focused on value creation as a standalone company." 

Going forward the brand said it will replace its senior credit facility (a term loan and revolving credit) with a securitization, with net proceeds going to repay the existing credit facility, refinancing transaction costs and other general corporate purposes, like returning shareholder cash.

When securitization is finished, the company will resume share repurchases through open market transactions and/or a potential accelerated share repurchase program, with an aim of a ratio of approximately five times EBITDA. 

With today's announcement, Jack in the Box also reaffirmed its long-term guidance, with an update for the impact of the revenue recognition accounting standard adopted this fiscal year. That includes a projection of system-wide sales of approximately $4 billion in fiscal 2022, driven by low single-digit increases in both annual same-store sales and system-wide unit growth, as well as restaurant-level margin of 25 percent to 27 percent of company restaurant sales, depending on same-store sales, and labor and commodity inflation.