KBRA assigns preliminary ratings to three classes of notes from Goddard Funding LLC Series 2022-1, a whole business securitization.

Goddard 2022-1 is the inaugural securitization in which Goddard Systems, LLC (Goddard or the Company) will contribute substantially all of its revenue-generating assets to the Issuer as collateral for the offered notes. Similar to other master trust WBS transactions, the Issuer can offer subsequent series of notes if certain requirements in the transaction documents are met. The Issuer is issuing three note classes totaling $392 million (the Series 2022-1 Notes or the Notes). The collateral includes existing and future franchise agreements and associated royalties and fees, other fees and income, and intellectual property. The proceeds from the offered notes will be used to refinance existing credit facilities, pay certain transaction expenses, make deposits into certain transaction accounts and for general corporate purposes, which may include a distribution to the Company’s equityholders.

Cash flows into the transaction are primarily top-line royalty payments from franchise locations, which are typically less volatile than other cash flows such as profits from company-operated locations. The incoming securitized collections are received primarily from royalty revenues (approximately 94.4% of securitization collections), as well as initial and other fees and income (5.6%). The transaction's leverage, calculated as total debt capacity divided by securitized net cash flow for the rated Notes, is approximately 5.5x.

Interest on the Notes is payable on each quarterly payment date. The Series 2022-1 Class A-2 Notes feature scheduled amortization of 1% per annum prior to the Anticipated Repayment Date (ARD) unless certain conditions are met. The Series 2022-1 Class A-2 Notes have an ARD in seven years; failure to refinance on or prior to ARD will result in rapid amortization paydown of the Notes.

The Goddard franchise network is a leading provider of premium early childhood education and childcare in the United States. The Goddard franchise network utilizes a framework focused on child-centered and play-based learning across its system of 592 schools across 37 states and the District of Columbia, as of June 30, 2022. For the twelve months ending (LTM) June 30, 2022, the system generated system-wide sales (SWS) of approximately $1.1 billion. The system is 100% franchised with approximately 470 franchisees.

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Related Publications

• Whole Business Securitization ABS Global Rating Methodology
• Global Structured Finance Counterparty Methodology
• ESG Global Rating 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.

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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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