Domino’s Securitizes Pizza

I was looking for the address of Domino’s Pizza Inc., so I could send them notice that my client was filing bankruptcy on a dishonored check. Domino’s is all over the internet and television with ads for pizza and ways to order online. But nowhere do they tell you their address.

So I pulled the 2007 Annual Report. Getting bored? Stay turned, I will make the point faster than Domino’s delivers a 30 minute pizza. There, on page 8 of the CEO’s letter to shareholders is the following statement:

“ABS - Asset-Backed Securitization

In April 2007, Domino’s Pizza Master Issuer L.L.C., a wholly-owned subsidiary of Domino’s Pizza, Inc., entered into an Asset- Backed Securitization debt facility, consisting of $1.6 billion in fixed rate senior notes, $150 million of a revolving credit facility, and $100 million of fixed rate subordinated notes. The $1.7 billion in fixed rate notes carry a 5-year blended cash interest rate of 6.06%. The ABS facility was secured by the majority of Domino’s revenue generating assets, including domestic royalties, most international income and supply chain EBITDA.”

Now, what does that mean? It means that Domino’s borrowed money and gave the lender the right to receive payment from future revenue. Domino’s sells cooked wet flour, with sauce, cheese and other toppings. And like most mortgage companies, car finance companies and credit card issuers, Domino’s securitized its product and cooked up a mighty fine pie full of cash.

Before collateral debt obligations and asset back securities became household words, my collegaues and I were explaining these financial arrangements to bankruptcy judges and attorneys. Often we would challenge a known company’s right to collect a debt because the debt had been sold to an unknown investor. Many times we were met with blank stares, like the deer-in-the-headlight-look, as even most creditor attorneys did not know how their own clients sold off debt. Now, the world is starting to see how big business runs everything from house mortgages to pizza dough through Wall Street.

Are you getting hungry for that pepperoni pizza? Remember, when you make the call, you are helping pay the investors who own the securitized debt. Think of those investors as debt collectors calling Domino’s for payment.