KBRA assigns preliminary ratings to two classes of notes from Driven Brands Funding LLC, Series 2022-1, a whole business securitization.
Driven 2022-1 represents Driven Brands, Inc.’s (Driven or the Company's) tenth securitization from its master trust, of which $1.9 billion are currently outstanding. The outstanding Series 2018-1, 2019-1, 2019-2, 2019-3, 2020-1, 2020-2, and 2021-1 Notes share in the same collateral pool. KBRA re-analyzed the prior Series in conjunction with the issuance of the Series 2022-1, and anticipates affirming all of the outstanding ratings on or shortly after the Series 2022-1 closing date.
Driven Brands is the largest automotive services company in North America. The Company’s platform fulfills a large range of core consumer and commercial automotive needs, including maintenance; paint, collision and glass; and platform services. As of June 25, 2022 (Q2 2022), the Driven Brands has 3,444 locations, including 591 company-operated locations across 49 U.S. states and all 10 Canadian provinces. Driven’s brands include ABRA, CARSTAR, Fix Auto USA, Maaco, Meineke, Take 5, Uniban, 1800-Radiator and PH Vitres D’Autos. In the last twelve months ending June 25, 2022 (LTM Q2 2022), the system generated approximately $4.4 billion in system-wide sales (SWS).
Driven Brands Funding, LLC (the Issuer) and Driven Brands Canada Funding Corporation (the Canadian Co-Issuer) and together with the Issuer, the “Co-Issuers” are expected to issue up to $500 million of Series 2022-1 Notes. The majority of the transaction cash flows are considered top-line revenues from franchise locations, which are typically less volatile than other cash flows such as profits from company-operated locations. The incoming securitized collections are comprised of top-line revenues, which include franchise royalty revenues (45.1% of securitized revenues), product distribution margin and franchise fees (13.2%), and profits from company stores and other operations (41.7%). As of September 26, 2022, securitized net cash flow is $363.3 million. The transaction's leverage is approximately 6.4x based on the leverage covenant if the aggregate amount of the Class A-2 Notes is upsized to $365 million.
The collateral includes all existing and future assets of the securitization entities, including franchise and development agreements in the U.S. and Canada, royalties from existing and future company-operated locations, product sourcing agreements, existing and future collections and profits from securitization-owned company-operated locations and related assets, profits from Canadian distribution and claims management assets and existing and future intellectual property including royalty income and other income from trademarks in the U.S. and Canada. The proceeds from the Series 2022-1 Notes will be used for general corporate purposes, including repaying outstanding debt and future acquisitions.
- Whole Business Securitization ABS Global Rating Methodology
- Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology
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.
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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