Morningstar DBRS Assigns Provisional Credit Ratings to Bojangles Issuer, LLC Series 2024-1 Notes

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the classes of notes to be issued by Bojangles Issuer, LLC as follows:

-- $50,000,000 Series 2024-1 Class A-1 Notes rated (P) BBB (sf)
-- $575,000,000 Series 2024-1 Class A-2 Notes rated (P) BBB (sf)

CREDIT RATING RATIONALE
-- The Company's scale, established brand within the Quick Service Restaurant (QSR) space, and franchise business model, with a 65% franchised system, $1.8 billion in systemwide sales, and growing unit count at 819;
-- The Company's long track record of growth, with system-wide sales consistently increasing for more than 35 years;
-- Favorable momentum in unit economics with average unit volumes climbing over the past five years to $2.295 million as of the end of Q2 2024 from $1.796 million in 2019;
-- Diversified product offerings with broad daypart, menu, and destination mix;
-- Long average franchisee tenure of 14 years, with 86% of franchised restaurants owned and operated by franchisees with 5-plus years in the system;
-- Morningstar DBRS' operational review of Bojangles' Restaurants, Inc. as the Manager. After an on-site meeting with management, and a review of company-provided and publicly available information, Morningstar DBRS believes Bojangles' Restaurants, Inc. is an acceptable Manager of chicken QSRs and its related franchising business, with an acceptable Back-Up Manager in FTI Consulting, Inc.;
-- The Company's positioning within the QSR industry with its chicken-oriented offerings. Chicken concepts have experienced a relatively faster pace of growth than other food concepts within QSR;
-- No growth assumptions in the cash flow scenarios, along with no recovery assumed from applied cash flow stresses for the life of the transaction;
-- The structural features of the transaction such as the senior notes interest reserve account, the cash trap reserve account, and the rapid amortization trigger, which help to accelerate the pay down of balance of the Notes upon deterioration in business performance;
-- Legal analysis of the structure; separation of the assets from the operating company, non-consolidation, true-contribution opinions;
-- Morningstar DBRS' review of the management fee, which is a critical component to the transaction especially given its long tenor;
-- The Transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, "Baseline Macroeconomic Scenarios for Rated Sovereigns September 2024 Update," published on September 25, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020; and
-- The cash flow analysis which shows a breakeven cash flow reduction threshold of 55.84% for the Class A-1 Notes and 54.85% for the Class A-2 Notes, both passing the BBB credit rating breakeven hurdle for this transaction. These cash flow results support the credit rating recommendation for the Series 2024-1 Class A-1 and Class A-2 Notes.

Morningstar DBRS' credit ratings on the securities referenced herein address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Senior Notes Quarterly Interest Amount, the related Senior Notes Interest Shortfall Amount, and the related Outstanding Principal Amount for each class of rated notes.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. The associated contractual payment obligations that are not financial obligations are the interest on any related Senior Notes Interest Shortfall Amount for each class of rated notes, and the Series 2024-1 Class A-1 VFN Post-Renewal Date Additional Interest, the Series 2024-1 Class A-2 Notes' Senior Notes Quarterly Post-ARD Additional Interest, and the Series 2024-1 Class A-2 Make-Whole Prepayment Consideration.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is:
-- Rating U.S. Structured Finance Transactions (Appendix XV: U.S Whole Business Securitizations; August 6, 2024), https://dbrs.morningstar.com/research/437571.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating U.S. Structured Finance Transactions (August 6, 2024), https://dbrs.morningstar.com/research/437571
-- Operational Risk Assessment for U.S. ABS Originators and Servicers (August 6, 2024), https://dbrs.morningstar.com/research/437545
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.