DBRS Assigns Provisional Rating to the Lender Funding Facility of Dryden 70 CLO, Ltd.

DBRS, Inc. (DBRS) assigned the following provisional rating of BBB (sf) to the Lender Funding Facility (the Facility) due May 2027 issued by Dryden 70 CLO, Ltd.:

The provisional rating on the Facility is being assigned pursuant to the Warehouse Agreement, dated as of May 22, 2018, between Dryden 70 CLO, Ltd. as Borrower; Barclays Bank PLC, New York Branch (Barclays) as Facility Agent; PGIM, Inc. (PGIM) as Collateral Manager; and U.S. Bank, N.A. as Collateral Administrator, Securities Intermediary and Security Agent.

The Borrower is a limited liability company established 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 provisional rating date, there exists no collateral loans in the transaction portfolio. PGIM will act as the Collateral Manager of the Borrower.

The Borrower will start to draw on the Facility 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 May 2019, followed by an amortization period. The warehouse will reach its maturity date at the earliest of the Collateralized Loan Obligation Closing Date, the Scheduled Maturity Date in May 2027 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 Party (Barclays) following an Event of Default (EOD). Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an EOD, the Instructing Party (Barclays) may, in its sole option, elect to designate an Acceleration Date and liquidate the portfolio.

The transaction contains collateral manager and subordinated lender types of EODs, which could lead to acceleration and liquidation. However, the transaction is, at closing, a single-lender facility where Barclays retains 100% of the rated Facilities. If at any time additional lenders are admitted into either rated facility, DBRS may either take a rating action or withdraw the rating on such facility at that time, subject to future amendments.

DBRS’s rating analysis does not take into account the risk of loss due to liquidation at market prices after an EOD has occurred.

The above rating on the Facility is provisional. The finalized rating will be issued upon receipt of confirmation that the aggregated funding amount of the Facility has reached $30 million as per the funding matrix stipulated in the Warehouse Agreement. To the extent that the documents and information provided to DBRS by the Borrower, Barclays Bank PLC (rated “A” with a Stable trend by DBRS) and the Collateral Manager as of this date differ from the executed versions of the governing transaction documents, DBRS may assign a lower finalized rating to the Facility or may avoid assigning a finalized rating to the Facility altogether.

The provisional rating reflects the following primary considerations:

(1) The Warehouse Agreement dated as of May 22, 2018.

(2) The integrity of the transaction structure.

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

A finalized rating will reflect the above considerations but will also take into consideration an assessment of the capabilities of the Collateral Manager as they relate to collateralized loan obligation management. As of the date of this provisional rating, DBRS has not yet evaluated PGIM as a Collateral Manager for this transaction. DBRS will perform an assessment of the origination and servicing capabilities of the Collateral Manager prior to finalizing its rating on the Facility.

The rating on the Facility addresses the timely payment of the Lender Base Interest Amount and Lender Additional Payment Amount and the ultimate payment of Outstanding Lender Funding Amount on or before the Scheduled Maturity Date in May 2027. For the avoidance of doubt, this provisional rating does not address the Additional Interest Amount.

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 a rating 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 dbrs.com 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.