The popular sandwich chain Subway has raised a $3.4 billion bond, the largest of its kind, to pay off its acquisition debt.

What Happened: The bond, secured by Subway’s U.S. franchisee royalties and intellectual property, was in high demand, with investor orders exceeding $20 billion, the Financial Times reported. This overwhelming interest allowed the debt package to be increased and the interest payments to be lowered.

Subway will use the funds from this bond to pay off a portion of the $5.4 billion debt initially extended by a group of banks to finance the acquisition by the leveraged buyout shop Roark. The remaining debt is expected to be paid off through a future whole-business securitization linked to Subway’s international operations.

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Investors saw this as an opportunity to deploy their accumulated funds and boost their returns in a market that has largely rallied this year. The yields on the debt, which included five-, seven- and 10-year notes, were higher than traditional corporate bonds with similar ratings.

Subway played a pivotal role in popularizing the franchise model, leading to its expansion from 16 shops in 1974 to over 36,000 globally by 2024. Yet, this success can pose challenges in raising debt through traditional markets. The typical collateral relied upon by creditors, such as individual stores and equipment, is owned by franchisees, making it a complex process for the company, according to the report.

Why It Matters: The successful bond offering is a significant development for Subway, which has been in the news for various reasons. Earlier this year, the company was embroiled in a controversy after an Ohio woman was mistakenly charged $1,000 for a sandwich, sparking a refund struggle.

Subway’s parent company, Roark, has been making waves in the fast-food industry, having completed a $9 billion acquisition of the sandwich chain earlier this year. The success of this bond offering further solidifies Roark’s position as a significant player in the industry.

In 2023, the company was embroiled in a tuna lawsuit saga, which was eventually dismissed. The company also faced criticism from Sen. Elizabeth Warren (D-Mass.) for its involvement in a $10 billion ‘Big Sandwich‘ PE deal that aimed to consolidate Subway, Jimmy John’s, and Arby’s under one roof.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote