DBRS Finalizes Provisional Ratings of Senior Funding Facility and Mezzanine Funding Facility of Neuberger Berman Loan Advisers CLO 27, Ltd.

DBRS, Inc. (DBRS) finalized the following provisional ratings of the Senior Funding Facility and the Mezzanine Funding Facility (together, the Facilities) of Neuberger Berman Loan Advisers CLO 27, Ltd.:

-- Senior Funding Facility due September 2026, rated A (sf)
-- Mezzanine Funding Facility due September 2026, rated BBB (low) (sf)

The ratings on the Facilities are being assigned pursuant to the Warehouse Agreement, dated as of September 20, 2017, between Neuberger Berman Loan Advisers CLO 27, Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; Neuberger Berman Loan Advisers LLC (Neuberger Berman) as Collateral Manager; and Wells Fargo Bank, N.A. as Collateral Administrator, Securities Intermediary and Security Agent.

The rating on the Senior Funding Facility addresses the timely payment of the Senior Base Interest Amount and Senior Additional Payment Amounts, and the ultimate payment of Senior Funding Amounts on or before the Scheduled Maturity Date in September 2026. The rating on the Mezzanine Funding Facility addresses the ultimate payment of the Mezzanine Base Interest Amount and Mezzanine Additional Payment Amounts, and the ultimate payment of the Mezzanine Funding Amounts on or before the Scheduled Maturity Date in September 2026. For the avoidance of doubt, these ratings do not address the Senior Additional Interest Amount or the Mezzanine Additional Interest Amount.

The Borrower is a limited liability company incorporated under the laws of the Cayman Islands. This transaction is set up as a cash flow securitization, which will be collateralized by a portfolio of leveraged loans subject to Collateral Quality and Portfolio Profile Tests. As of the finalized ratings date, the transaction portfolio consists of approximately $31.9 million of senior secured term loans to 18 unique obligors, and the Borrower will continue to draw on the Facilities based on a predetermined schedule. Upon each drawing request, the Collateral Manager will comply with certain portfolio tests. The warehouse will have a reinvestment period end date in June 2018, followed by an amortization period. The warehouse will reach its maturity date at the earliest of the CLO Closing Date, the Scheduled Maturity Date in September 2026 or the date upon which the final payment on the last of the collateral of the portfolio has been received.

An early maturity date can be caused by an Optional Early Maturity Date (no earlier than 12 months after the reinvestment period end date) or at the sole option of the Instructing Lender (Barclays) following an Event of Default (EOD). Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an EOD, the Instructing Lender (Barclays) may, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio, which could adversely affect the Mezzanine Lenders and potentially affect ratings volatility on the Mezzanine Funding Facility.

As the trades settle in the warehouse portfolio, under the drawing schedule, Barclays (as Senior and Mezzanine Lender) will continue to fund the Facilities upon the Borrower’s request. In its analysis, DBRS has considered Barclays’ ability to fund the Facilities, and it will continue to monitor the transaction as part of ongoing surveillance. Barclays Bank PLC currently has a public Long-Term Debt rating of “A” with a Stable trend by DBRS.

The finalized ratings reflect the following primary considerations:

(1) The Warehouse Agreement dated as of September 20, 2017.

(2) The integrity of the transaction structure.

(3) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

(4) DBRS’s assessment of the collateralized loan obligation management capabilities of Neuberger Berman.

To assess portfolio credit quality, DBRS will provide a credit estimate or internal assessment for each corporate obligor not publicly rated in the portfolio. Credit estimates are not ratings; rather, they represent a primarily model-driven default probability for each obligor that is used in assigning ratings to the transaction.

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

The principal methodology is Rating Methodology for CLOs and CDOs of Large Corporate Credit, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

For more information on this credit or on this industry, visit www.dbrs.com, or contact us at info@dbrs.com.