What conditions are required for renewal of the Series 2018-1 Variable Funding Notes for Hardees?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
----------------|-----------| | 2027 | 11,800 | | 2028 | 383,800 | | 2029 | 398,675 | | 2030 | 3,500 | | Thereafter | 329,875 | | Total long-term debt | 1,139,450 |
Senior Notes
In April 2013, Carl's Jr. Funding LLC and Hardee's Funding LLC (collectively, the "Co-Issuers"), our indirect wholly-owned subsidiaries, issued outstanding senior secured notes under securitized facility loans. The indenture governing the facility loans (the "Indenture") allows the Co-Issuers to issue additional series of notes in the future subject to certain conditions.
As of January 31, 2025, the Co-Issuers had issued the following outstanding series of fixed rate senior secured notes: (i) 2018-1 Class A-2-III Notes with an initial principal amount of $250,000; (ii) 2020-1 Class A-2 Notes with an initial principal amount of $400,000; (iii) 2021-1 Class A-2 Notes with an initial principal amount of $180,000 and (iv) 2024-1 Class A-2 Notes with an initial principal amount of $350,000 (collectively, the notes described in (i) to (iv) are referred to herein as the "Class A-2 Notes").
The Series 2018-1 Variable Funding Notes provide for senior secured revolving facility loans, including subfacilities for swingline loans and letters of credit, in an aggregate amount of $125,000. On April 5, 2024, the Series 2018-1 Variable Funding Notes were amended to increase the borrowing capacity from $70,000 to $125,000 and extend the maturity date to March 2029, including options for renewal for two additional twelve-month terms (subject to certain conditions, including a minimum debt service coverage ratio). The Series 2018-1 Variable Funding Notes bear interest at a variable interest rate equal to (a
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the Series 2018-1 Variable Funding Notes, which provide for senior secured revolving facility loans, have options for renewal for two additional twelve-month terms. These renewals are subject to certain conditions, including maintaining a minimum debt service coverage ratio.
The Series 2018-1 Variable Funding Notes bear interest at a variable rate, which is determined by how the borrowings were funded by participating investors. The interest rate is calculated as either (a) a commercial paper rate plus 3.00%, (b) the term SOFR rate plus 3.00%, or (c) 2.00% plus the greater of (i) the Prime Rate, (ii) the Federal Funds rate plus 0.50%, or (iii) term SOFR plus 1.00%. Hardees is also required to pay a commitment fee of 0.50% per annum for any unused commitments and letter of credit fees of 3.00% per annum on outstanding non-cash collateralized letters of credit.
As of January 31, 2025, the Co-Issuers had zero outstanding loan borrowings, $24,245 of outstanding letters of credit, and remaining availability of $100,755 under the Series 2018-1 Variable Funding Notes. The notes were amended on April 5, 2024, to increase the borrowing capacity from $70,000 to $125,000 and extend the maturity date to March 2029. The Class A-2 Notes and the 2018-1 Variable Funding Notes are collectively referred to as the "Senior Notes."
For a prospective Hardees franchisee, understanding the conditions tied to the renewal of these notes is crucial, as it reflects the financial health and obligations of the company. The "minimum debt service coverage ratio" requirement means that Hardees must maintain a certain level of profitability relative to its debt obligations to be eligible for renewal. Failure to meet this ratio could impact the company's financial flexibility and potentially affect its ability to support franchisees.