Swiss Re, Ambac Arrange Innovative Arby’s Financing

Swiss Re New Markets and Ambac Assurance Corp. have teamed up to provide $290 million in financing to the Arby’s restaurant chain, best known for its roast beef sandwiches. In an innovative structuring for the placement of the triple-A rated notes, Swiss Re “takes the first loss position” and Ambac “the excess risk position” for the asset backed securities.

The security, however, isn’t restaurant buildings and equipment, but the Arby’s name itself. In a move that adds new value to the term intellectual property, and is believed to be a first, Swiss Re said the repayment of the notes and the interest, “is backed by rights to collect franchise royalties and fees from current and future Arby’s branded franchise owners throughout the U.S. and Canada.”

Ambac’s Vice President Jennifer Williams Costain described the deal as “groundbreaking,” and noted that “the notes are linked to the value of the intellectual property of the Arby’s brand through the fees paid for the use of the brand name, as opposed to the physical assets, such as property and equipment.”

SRNM sees a big future for this type of financing, as it lets borrowers raise capital at lower costs than traditional financing methods. “This demonstrates that the convergence of capital and insurance markets are two sides of the same coin – in this instance, Swiss Re New markets is transferring capital markets risk to the insurance market,” said the announcement.