Affinity refinances $130 mn debt as Burger King sale delayed

Affinity Equity Partners has refinanced 170 billion won ($130 million) in debt borrowed to acquire Burger King’s operations in South Korea and Japan, according to investment banking sources on Friday.

The refinancing is expected to give the Hong Kong-based investment firm more time to exit the US fast-food chain after it halted the sale process in November of last year.

It also marked the first refinancing deal executed in South Korea to date, as high interest rates and the funding squeeze are bringing some companies to the brink of default.

The refinancing costs more than doubled to 9% from 4%. The original loan was due this month.

Among its existing lenders, Korea Development Bank, Hyundai Marine & Fire Insurance Co. and SBI Savings Bank took part in the refinancing package, underwritten by Samsung Securities Co.

Korea Investment & Securities Co., Hana Capital Co. and Shinhan Capital Co. joined them as new lenders.

To facilitate the refinancing, Affinity recently extended its master franchise agreement with Burger King’s parent company in the US, under which it secured the rights to open stores in South Korea and Japan. 

Affinity acquired Burger King’s operations in both countries for a combined 220 billion won between 2016 and 2017.

In 2019, it retrieved part of its investment in the company through dividend income and by doubling its debt financing volume from 80 billion won. 

In 2021, it put them up for sale and selected Goldman Sachs as its sale manager, a deal estimated at 700 billion won.

Other fast-food franchises' operations in Korea have been on the market as well, including McDonald’s Corp. and home-grown burger chain Mom’s Touch & Co. But there has been little progress in their sales plans.

Last month, Asia-focused Orchestra Private Equity agreed to buy a 100% stake in the domestic operations of fried chicken chain KFC for around 60 billion won.

As the capital markets remain subdued, more and more companies are under pressure. ABLE C&C Co., a cosmetics brand, defaulted on its loan last year after it failed to extend its debt maturity.

But Lock&Lock Co., a plastic container maker, and furniture company Hanssem Co. managed to avoid default after their top shareholders refinanced their debts late last year.

Write to Dong-hun Lee at leedh@hankyung.com

Yeonhee Kim edited this article