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KBRA Assigns Preliminary Rating to Hardee’s Funding LLC, Carl’s Jr. Funding LLC, Series 2020-1

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Kroll Bond Rating Agency (KBRA) assigns preliminary rating to a note class of Hardee’s Funding LLC, Carl’s Jr. Funding LLC, Series 2020-1, a whole business securitization (WBS).

This transaction is the third 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 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.

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

As of August 10, 2020, the CKE restaurant system included 3,844 restaurants with annual system-wide sales of approximately $4.2 billion. The transaction includes royalty payments from 3,588 franchise locations and 256 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 44 foreign countries and US territories.

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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 U.S. Information Disclosure Form 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 U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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 and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.

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Contacts

Analytical Contacts

Xilun Chen, Senior Director (Lead Analyst)
+1 (646) 731-2431
xchen@kbra.com

Abby Barkwell, Director
+1 (646) 731-3304
abarkwell@kbra.com

Anna Roginkin, Associate Director
+1 (646) 731-1212
aroginkin@kbra.com

Rosemary Kelley, Senior Managing Director (Rating Committee Chair)
+1 (646) 731-2337
rkelley@kbra.com

Business Development Contact

Ted Burbage, Managing Director
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