Arcos Orders from Dollar Menu

Arcos Dorados, the holdco for McDonald’s LatAm business, has altered its takeout strategy for a $350m 18-month M&A bridge loan raised via Santander in August 2007, say people close to the company. The sponsors – including executive Woods Staton, DLJ South American Partners and Brazil’s Gavea – were most recently hoping to raise local currency loans in Brazil, Mexico and Puerto Rico and feed proceeds back to the holdco to pay down the bridge, which matures in February 2009. The new plan is to do a takeout by raising a $350m international syndicated loan at the holdco level. FX swaps into local currency to match revenues will be employed where necessary, say people familiar with the process. Pricing in the international market appears more attractive than the combined rate that can be achieved locally, say executives involved in the transaction. And a single facility at the holdco level makes for a less complex debt structure, they add. Santander had hoped to turn the transaction into multiple local currency takeouts, exploiting its widespread local networks and domestic balance sheet. The original proposal involved local bond markets, then changed to the domestic loan market. Now, a dollar loan, with no particular on-the-ground expertise required, seems to be the best way to go for Arcos. Pricing and tenor are heard close to being finalized. Santander will lead. Arcos Dorados purchased a 20-year franchise for the LatAm business last year for $700m, half of which was paid with equity.