Tim Hortons Inc. (THI) bondholders will pay a price if they relinquish their debt under threat of a downgrade to junk because of the doughnut chain's purchase by Burger King Worldwide Inc.

Under what's known as a change-of-control provision, investors have the option to hand the debt back at a price of 101 percent of face value, or five cents less than what the bonds traded at before the second-largest U.S. burger company agreed this week to acquire Oakville, Ontario-based Tim Hortons for about C$12.5 billion (US$11.4 billion).

Investors will probably choose the so-called poison put to avoid deeper losses given that Burger King is rated five levels lower, according to Noel Hebert, an analyst who follows the restaurant industry for Bloomberg Intelligence. DBRS Ltd., the only firm that rates Tim Hortons' C$1.2 billion of bonds, said yesterday it was reviewing the BBB ratings for downgrade and that its credit risk profile “will no longer be consistent with an investment-grade rating.”