KBRA Assigns Preliminary Ratings to Hardee’s Funding LLC, Carl’s Jr. Funding LLC, Series 2021-1 Senior Secured Notes

Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to a class of notes from Hardee’s Funding LLC, Carl’s Jr. Funding LLC, Series 2021-1, a whole business securitization (WBS).

This transaction is the fourth WBS issued by Hardee’s Funding LLC and Carl’s Jr. Funding LLC (the “Co-Issuers”). In connection with its first securitization transaction in 2013, CKE Restaurants Holdings, Inc. (“CKE”, or the “Company”) contributed substantially all of its revenue-generating assets to the Co-Issuers as collateral for the then offered notes. CKE Restaurants Holdings, Inc. is the franchisor and operator of restaurants under the core brands of Carl’s Jr. and Hardee’s, as well as, to a lesser degree, Red Burrito and Green Burrito. The collateral includes existing and future domestic and international franchise agreements, existing and future domestic company-operated restaurant royalties, existing and future profits from domestic company-operated restaurants, certain owned real estate, franchisee leases, and intellectual property. The proceeds from the Series 2021-1 Notes will be used to pay transaction fees and expenses and for general corporate purposes.

In conjunction with the issuance of the Series 2021-1 Notes, KBRA anticipates affirming the ratings on the Co-Issuers’ outstanding Series 2018-1 Class A-1, Class A-2-II, A-2-III Notes and Series 2020-1 Class A-2 Notes. The ratings are consistent with the results of our cash flow scenarios following the addition of the Series 2021-1 Notes.

As of January 25, 2021, the CKE restaurant system included 3,834 restaurants with annual system-wide sales of approximately $4.2 billion. The transaction includes royalty payments from 3,583 franchise locations and 251 company-operated restaurants, representing approximately 93% and 7% of total system-wide locations, respectively. The restaurant locations are located within the US across 42 states and in 40 foreign countries and US territories.

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Related Publications

• Whole Business Securitization ABS Global Rating Methodology
• Global Structured Finance Counterparty Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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