Project Wickfield — Whole-Business Securitization
A 2-hour Structured Finance / Whole-Business Securitization case study with a complete model answer
The Situation
Wickfield Restaurant Group, Inc.
Wickfield Restaurant Group
- Sector
- Restaurant franchising — a 2,400-unit bone-in fried chicken system earning continuing royalties, initial franchise and development fees, net rent on subleased sites and retail trademark licensing income, alongside 132 company-operated restaurants
- Size
- Geography
- United States; the Series 2027-1 notes are contemplated as a Rule 144A offering into the US market, with pricing targeted for March 2027
- Ownership
- Situation
The Prompt
You are the structuring analyst.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Blank modeling template
XLSXUnlock
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
The securitizable cash flow, and the bridge to Adjusted EBITDA
PART 2
The five-year system projection
PART 3
Sizing, tranching and the binding agency test
PART 4
Debt service, coverage and where the deleveraging comes from
PART 5
The trigger ladder, translated into systemwide sales
PART 6
Priority of payments and what makes the entities remote
PART 7
The term loan B alternative, tested on the same unit
PART 8
All-in cost, flexibility and the recommendation
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and Excel model are in the solution set below.
- 01
Decide what is being pledged before you compute anything
- 02
Bridge to corporate Adjusted EBITDA and keep the two apart
- 03
Treat each agency test as an identity, not a search
- 04
Restate every trigger in the unit the company manages
- 05
Compare on two bases, because a rate answers half the question
- 06
Write a recommendation that concedes what it costs
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Whole-business securitization
A financing in which a contractual cash flow stream — here franchise royalties, fees, sublease rent and trademark licensing — is contributed to bankruptcy-remote entities and notes are issued against it, rather than against the operating company's earnings. The lender's credit is the durability of the contracts, not the health of the borrower, so the structure can support materially more debt per dollar of earnings than a corporate loan can. What makes it work is isolation: a true sale of the contributed assets, an independent manager whose consent is required to file, a non-consolidation opinion and separateness covenants. Remove any one and the entities are subsidiaries with a complicated name and the rating goes with it.
The securitizable base versus corporate EBITDA
The pledged base is smaller than corporate Adjusted EBITDA, always, and that is the point rather than a problem. Lines that cannot be pledged fall out for different reasons: an advertising fund is collected in trust and is not the company's money, an operating restaurant estate would put operating risk inside the entities, and rebates arising under contracts held at the parent were never contributed. Against that, the expenses of running the franchise system and the manager's fee are deducted inside the boxes. The whole advance-rate argument is that you securitize less earnings at a higher multiple — and any comparison that switches denominators midway through has answered a different question.
Debt service coverage, and capacity as an identity
Every rating agency test in this structure is struck on securitized net cash flow rather than on corporate earnings: a maximum leverage multiple and a minimum coverage ratio, applied separately to the senior class and to the whole stack. Capacity under a leverage test is a multiplication. Capacity under a coverage test is a rearrangement — debt service is a blended coupon plus a fixed amortization rate on the same balance plus a fixed fee, so the coverage constraint solves for a maximum balance algebraically. Which of the four tests binds, and by how little, is the first real answer the exercise wants.
Cash trapping and rapid amortization triggers
The trigger ladder is a sequence of coverage levels, and neither of the first two rungs is an event of default. Below the cash trapping level the excess cash stops being released to the parent and is held in a trap account; below the rapid amortization level every dollar of excess cash flow goes to principal instead. Only the lowest rung is a default, and it carries the right to terminate the manager. This is a different risk profile from a maintenance covenant, where a breach lets lenders accelerate — and stating that difference, rather than saying the structure has no covenants, is what separates a real answer from a sales pitch.
The anticipated repayment date
The legal final maturity of these notes is thirty years away and it is not the date that matters. The anticipated repayment date is, and missing it is not a payment default: the coupon steps up and the structure switches into rapid amortization, so every dollar of excess cash goes to principal. That makes an ARD a refinancing problem rather than an insolvency, which is a materially slower and more survivable kind of problem — but it also means the real maturity wall is the balloon outstanding at the first ARD, and a model that reports the legal final has reported the wrong number.
Operating leverage of a pledged cash flow stream
A royalty stream does not fall in step with systemwide sales, it falls faster, because the expense base inside the entities and the manager's fee do not move and the sublease rent is contractual. So a one-point fall in systemwide sales costs more than a proportionate share of the pledged cash flow. Different lines have different elasticities — development fees fall roughly twice as fast because franchisees stop signing, licensing is protected by a fixed minimum — and building the slope line by line rather than assuming a single factor is what makes the trigger translation defensible. Corporate earnings are geared more steeply still, because the company-operated restaurants sit inside them.
Advance rate versus corporate leverage
The comparison that decides the case is how much money each structure raises against the same business, and what the marginal money costs. Compute the all-in cost of each structure — coupon, upfront cost spread over the refinancing horizon, and everything paid annually regardless — and then compute the extra annual cost of the securitization divided by the extra proceeds it raises. That marginal rate is what decides the transaction, because it prices the last tranche of money that the corporate loan market would not have lent at all against this credit.
What the structure costs in operating flexibility
The price of a securitization is more than basis points. Cash sweeps weekly through control accounts to the trustee. Refranchising above a cap needs rating agency confirmation, and so does amending the form of franchise agreement or changing the royalty rate. Dispositions of pledged assets run against a fixed basket. Separate books, separate auditors and an independent manager are required to preserve the true sale. And distributions to the owner stop the moment coverage falls below the trapping level — which is to say the first thing the structure does in a downturn is stop paying the person who built it. A recommendation that prices the coupon and says nothing about this column has priced half the transaction.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Securitizable cash flow definition
- —DSCR and rapid amortization triggers
- —Tranching and credit enhancement
- —Bankruptcy-remote structure design
- —Advance rate versus corporate leverage
- —All-in cost comparison
Answer Deck
Full model answer, banker-formatted
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Wickfield — Whole-Business Securitization
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is a whole-business securitization case study?
It is a structured finance exercise rather than a valuation one. Nobody is buying or selling the company; the question is how much debt a specific contractual cash flow stream can support once it has been isolated in bankruptcy-remote entities, and what that isolation costs. The deliverable is a workbook that defines the pledged base, sizes the notes under rating agency leverage and coverage tests, builds the debt service schedule and the trigger ladder, and compares the result against a conventional corporate loan on both price and operating freedom — plus a short presentation carrying the recommendation. It appears in leveraged finance, structured finance and debt capital markets interviews, and it is unlike the M&A modeling test most candidates prepare for.
Why can a franchisor borrow more against royalties than against EBITDA?
Because the lender is underwriting a different thing. A corporate loan is secured on a business that can lose money, close restaurants and go bankrupt; notes issued out of bankruptcy-remote entities are secured on contracts that continue to pay whether or not the parent is solvent, backed by a true sale, separateness covenants, an independent manager and a non-consolidation opinion. A royalty on a franchisee's sales is also more durable than the profit of an operated restaurant, since it is a percentage of the top line rather than a residual after costs. So the market lends against a smaller earnings base at a considerably higher multiple, and whether that trade is worth making is exactly the question this case asks.
How should you allocate 120 minutes across this case?
A working budget that sums to 120: about 15 minutes reading the assumptions tab and writing down which lines are pledged and which are not, before touching a formula; about 80 minutes at the keyboard on the workbook; and about 25 minutes on the presentation. The workbook measures 467 fillable cells collapsing to 315 distinct authored formulas, roughly 23 seconds each, because the projection is five years wide and most formulas are written once and filled right across. Inside the 80 minutes, the sizing tab and the trigger translation are worth more than a proportional share of your attention — they are where the case is decided, and everything downstream reads off them.
What is the difference between a cash trapping event and an event of default?
A cash trapping event stops cash being released to the parent and holds it in a trap account; the noteholders continue to be paid on schedule and nothing accelerates. Rapid amortization goes one step further and directs every dollar of excess cash flow to principal, which repays the notes faster than the schedule requires — still not a default. An event of default is the lowest rung, and in this structure it also carries the right to terminate the manager and appoint a replacement. The practical consequence is that the first two rungs cost the owner money and cost the noteholders nothing, which is the opposite of how a maintenance covenant breach works, and the comparison between the two structures turns on exactly that difference.
Why is interest charged on the beginning-of-period balance?
Because it removes the circularity by construction instead of hiding it. If interest is charged on the average or closing balance, the interest expense depends on a balance that depends on the cash flow that depends on the interest expense, and the model needs iterative calculation switched on to resolve. Charging interest on the balance at the start of the period breaks that loop: the balance is known before the period begins, so nothing in the workbook is circular and nothing needs a toggle. On a structure whose principal amortizes at one percent a year the difference in the number is small; the difference in whether anyone can audit the model is not.
Why translate coverage triggers into a decline in systemwide sales?
Because systemwide sales are what the company actually reports and manages, weekly, and a debt service coverage ratio is not. Telling a franchisor that its notes trap cash below a given coverage level tells it nothing it can act on. Telling it the same thing as a percentage fall in systemwide sales tells it exactly how much of a downturn the structure absorbs before the owner stops being paid. The translation also does something the comparison could not otherwise do: the securitization has coverage triggers and the term loan has a leverage covenant, and converting both into the same unit is the only way to rank the three events against each other.
Why is there no discounted cash flow in this case?
Because nothing is being valued. The company is not being sold, no equity is changing hands, and there is no sponsor underwriting a return — the founding family is refinancing debt and taking a distribution. A discounted cash flow would produce an enterprise value that no part of the decision uses: the notes are sized off coverage and leverage tests against a defined cash flow stream, and the alternative is sized off a maintenance covenant against corporate EBITDA. That has consequences for the whole submission. There is no cost of capital to build, no terminal value to disclose, no comparable companies, no precedent transactions and no football field, and a page carrying any of them is a page about a different transaction.
What does 'bankruptcy remote' actually mean, and what is the limit?
It means the issuing entities are constructed so that the parent's insolvency does not sweep them into the estate: the pledged assets were contributed by true sale rather than pledged as collateral, the entities keep separate books, auditors and accounts, they observe separateness covenants, they have an independent manager whose consent is required before any voluntary filing, and counsel has given a non-consolidation opinion. The limit is in the word remote. It is not bankruptcy proof, the isolation depends on the formalities actually being observed after closing rather than only at it, and the cash flow still comes from a system that has to keep being run — which is why the manager's fee ranks ahead of every note in the waterfall.
About This Structured Finance / Whole-Business Securitization Case Study
Structured Finance / Whole-Business Securitization case study for investment banking interviews. 120-minute format covering securitizable cash flow definition, dscr and rapid amortization triggers, tranching and credit enhancement. Includes the full prompt, a model answer deck, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Structured Finance. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
120-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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