KBRA Assigns Preliminary Ratings to HOA Funding, LLC Series 2021-1 Senior Secured Notes

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of notes from HOA Funding, LLC Series 2021-1, a whole business securitization. KBRA also anticipates withdrawing the ratings on the Series 2014-1 Class A-1 and A-2 Notes as well as the Series 2015-1 Class A-2 and Class B Notes.

This transaction is the third whole business securitization (“WBS”) issued by HOA Funding, LLC (“Master Issuer”). In connection with its first securitization transaction in 2014, Hooters Restaurant Group, LLC (“HOA”, “Hooters” or the “Company”) contributed substantially all of its revenue-generating assets to the Master Issuer and its subsidiaries (together, the “Co-Issuers”) as collateral for the then offered notes. The Master Issuer is issuing two classes of notes totaling $315 million (the “Notes”). The transaction collateral includes existing and future domestic and international franchise agreements, existing and future company restaurants and related assets, intellectual property and certain transaction accounts. The proceeds from the offered Notes will be used to refinance the Company’s currently outstanding securitization debt and pay transaction fees and expenses.

In conjunction with the issuance of the Series 2021-1 Notes, KBRA anticipates withdrawing the ratings on the Master Issuer’s outstanding Series 2014-1 Class A-1 Notes, Series 2014-1 Class A-2 Notes, Series 2015-1 Class A-2 Notes and Series 2015-1 Class B Notes (together, the “Existing Transaction”). The Existing Transaction ratings were placed on Watch Developing in June 2021 owing to considerations related to improved system performance, transaction cash flows as well as the anticipated repayment date in August 2021. Subsequent to the Watch Placement, system performance continued to improve. Additionally, the Series 2021-1 transaction include tighter triggers than the Existing Transaction.

The Company is the franchisor and operator of restaurants under the Hooters and hoots wings brands. Founded in 1983 and headquartered in Atlanta, GA, the Hooters system includes 377 restaurants with 313 domestic locations across 37 states and 64 international locations in 18 foreign countries as of May 16, 2021. System-wide sales totaled approximately $785 million as of the twelve months ending May 16, 2021 and the system is approximately 47% franchised.

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Related Publications

• Whole Business Securitization (WBS) ABS Global Rating Methodology
• ESG 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.