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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

MOODYS DOWNGRADES NOTES FROM CNL FUNDING 98-1 and CNL FUNDING 99-1

11 Feb 2011

Approximately $204 million of asset backed securities affected.

New York, February 11, 2011 -- Moody's Investors Service has downgraded four classes of certificates issued by CNL Funding 98-1, LP, and six classes of certificates issued by CNL Funding 99-1, LP. The certificates are backed by franchise loans made to fast-food and casual dining restaurants. Credit enhancement for the certificates consists of solely of subordination and overcollateralization of the certificates by the loans. The rating actions are prompted by potentially insufficient levels of credit enhancement available to protect noteholders from future losses. The complete rating action is as follows:

Issuer: CNL Funding 98-1, LP

Class D-1, Downgraded to B1 (sf); previously on Nov 10, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade

Class D-2, Downgraded to B1 (sf); previously on Nov 10, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade

Class E-2, Downgraded to Caa3 (sf); previously on Nov 10, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Class E-1, Downgraded to Caa3 (sf); previously on Nov 10, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Issuer: CNL Funding 99-1, LP

Class A-2, Downgraded to A2 (sf); previously on Nov 10, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Class IO, Downgraded to A2 (sf); previously on Nov 10, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Class B, Downgraded to Baa2 (sf); previously on Nov 10, 2010 A2 (sf) Placed Under Review for Possible Downgrade

Class C, Downgraded to Ba1 (sf); previously on Nov 10, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

Class D, Downgraded to Ba2 (sf); previously on Nov 10, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Class E, Downgraded to B3 (sf); previously on Nov 10, 2010 B1 (sf) Placed Under Review for Possible Downgrade

RATINGS RATIONALE

In CNL Funding 98-1, LP, the fixed (D-1 and E-1) and floating rate (D-2 and E-2) certificates are backed by fixed and floating rate pools, respectively. As of the Jan 18th, 2011 payment date, the Class D certificates benefit from 17% subordination of Class E certificates, and the Class E certificates are unsupported. The fixed and floating rate pools are cross supported with losses allocated to both subpools in reverse alphabetical order. The transaction has suffered from significant collateral losses following the Chapter 7 bankruptcy of S&A Restaurants Corp in 2008, which resulted in the liquidation of many Steak & Ale properties in both subpools. While the transaction no longer has any exposure to Steak & Ale, it is still subject to significant franchise concept concentration risks with Taco Bell, Burger King, and KFC comprising 38%, 18%, and 16% of total outstanding pool balance, respectively.

In CNL Funding 99-1, LP, subordinated certificates provide credit support of 48% to Class A , 35% to Class B, 27% to Class C, 23% to Class D, and 15% to Class E as of the January 18th 2011 payment date. The transaction has suffered from collateral losses, completely depleting the initial overcollateralization amount of $1,391,620 at closing and leading to writedowns on the Class H certificates. The transaction remains subject to significant franchise concentration risks with Wendy's, Taco Bell, and KFC comprising 29%, 15% and 15% of the outstanding pool balance, respectively.

The primary source of uncertainty for the transactions is the current macroeconomic environment and its impact on the restaurant and fast food industry. Moody's current outlook on the restaurant industry is stable but weak as many fast food restaurants remain under financial pressure. The prolonged recovery of the restaurant industry may lead to future defaults as borrowers continue to suffer from cash flow constraints.

In order to estimate losses on the collateral pools, Moody's calculates the expected loss given default of the obligors that have become nonperforming, and also estimates future losses on performing portion of the pools, all as a percentage of the outstanding pool balances. In evaluating the nonperforming loans, key factors include collateral valuations and expected recovery rates, volatility around those recovery rates, historical obligor performance, time until recovery or liquidation on defaulted obligors, concessions due to restructuring which may negatively impact the overall cash flow of the trust and/or the collateral, and future industry expectations. In evaluating the performing portions of the pools, we estimate default rates based on industry outlook and credit quality of underlying concepts and/or borrowers, with additional stress applied for highly concentrated pools, such as the two CNL Funding pools in these actions. We then apply a stressed loss severity that accounts for historical loss experience as well as possible future deterioration of the underlying collateral. Our total losses are then evaluated against the available credit enhancement provided by overcollateralization, subordination, and excess spread. Sufficiency of coverage is considered in light of remaining borrower concentrations and concepts, remaining bond maturities, and economic outlook.

Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website at www.moodys.com. In addition, Moody's publishes a weekly summary of structured finance credit, ratings, and methodologies available to all registered users of our website at www.moodys.com/SFQuickCheck

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, confidential and proprietary Moody's Investor Service's information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purpose of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Amelia (Amy) Tobey
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Vikram Josyula
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODYS DOWNGRADES NOTES FROM CNL FUNDING 98-1 and CNL FUNDING 99-1
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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