Subway is exploring a sale. It hopes a $5B debt plan will sweeten the deal, per report

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Subway is on the market and hoping to sell for over $10 billion. A $5 billion debt plan could help make it happen, according to reporting from Reuters.

The sandwich chain in February confirmed that its shareholders were exploring a possible sale, and CEO John Chidsey last month said he aims to have a deal signed by early June, according to the trade publication Restaurant Business Online.  

JPMorgan Chase & Co., Subway’s financial adviser, has put forward a $5 billion debt financing package based on a mix of loans and bonds meant to show buyout firms they can borrow enough to meet Subway’s $100 billion-plus valuation, according to an exclusive from Reuters

Spokespeople for JPMorgan declined to comment, and Subway sent a statement saying the company doesn’t intend to comment further until a transaction is complete.  

Who is interested in buying Subway?

The debt plan is meant to help bidders overcome a challenging economic environment where rising interest rates and concerns about the possibility of a looming recession have made debt more expensive for buyout firms, according to Reuters’ report.  

Despite the challenges, chief executive Chidsey last month said it is the “perfect time” to sell because there are few other deals and private-equity firms are sitting on a lot of capital, according to Restaurant Business Online. 

Siting anonymous sources, Reuters reported that second-round bids for Subway came in last week from more than 10 private-equity firms including Bain Capital, TPG, Advent International Corp, TDR Capital, Goldman Sachs’s buyout arm and Roark Capital.

So far, bids for the company have ranged from $8.5 billion to $10 billion, according to the report. 

What is Subway doing to refresh?

Subway has been in the midst of a turnaround, which could help the company meet its $10 billion-plus valuation.

After shrinking its domestic footprint and seeing profits bogged down by its famous $5 footlong sandwich deal, the private company has overhauled its menu, refreshed its marketing and worked on consolidating locations.

In April, Subway said it saw its ninth consecutive quarter of positive sales in the first quarter, with a 12% year-over-year increase in same-store sales and a 11% increase in digital sales.

The chain has nearly 37,000 restaurants in more than 100 counties. 

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You can follow USA TODAY reporter Bailey Schulz on Twitter @bailey_schulz and subscribe to our free Daily Money newsletter here for personal finance tips and business news every Monday through Friday.



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