Sandwich chain Subway is selling US$3.35 billion of asset-backed securities to help fund its buyout, marking the largest securitization of its kind on record.

The sandwich maker is selling a whole business securitization, where a company pledges most of its assets as collateral, including franchise fees, according to people with knowledge of the deal. Morgan Stanley and Barclays Plc are joint structuring advisers for the transaction, the people said. 

The bond offering is already more than two times oversubscribed, according to people familiar. Demand for available bonds that were not already committed is around four times or more, the people said.

Once completed, Subway’s ABS debt sale will surpass major prior WBS deals, including multiple billion dollar transactions from Dunkin’ Brands Group Inc., Domino’s Pizza Inc. and Taco Bell, according to data from Barclays. The previous record was held by Dunkin’s approximately US$2.5 billion WBS deal in 2015.

Whole business securitizations have been a natural source of capital for businesses with large networks of franchised stores. The WBS structure allows investors to give borrowers cheaper financing terms in exchange for more control of the assets, making it attractive for restaurants chains and gyms. This year, seven other deals have priced including Zaxby’s, a chicken finger restaurant chain, and Nothing Bundt Cake, a series of bakeries.

Last year, private equity company Roark won the race to buy the sandwich shop for more than $9 billion, of which $5 billion of financing came from major banks. Subway has expanded dramatically to more than 37,000 restaurants compared with 16 shops in 1974.

ABS sales have been running about 27% higher this year compared to the same point in 2023, with traditional collateral like auto loans and unusual collateral such as data centers driving issuance to a record start. 

Representatives for Morgan Stanley, Roark and Subway didn’t respond to requests for comment. Barclays declined to comment.