DBRS Finalizes Provisional Rating on the Facility of Dryden 70 CLO, Ltd.

DBRS, Inc. (DBRS) finalized the following provisional rating on the Lender Funding Facility (the Facility) of Dryden 70 CLO, Ltd.:

-- Facility due May 2027 rated BBB (sf)

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

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 finalized rating date, there exist $54.89 million of senior secured term loans to 72 unique borrowers, and the Borrower will continue 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 CLO 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.

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.

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 EOD. Under the Warehouse Agreement, upon an occurrence of (and during the continuation of) an Event of Default, 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 Events of Default, 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 Event of Default has occurred.

The finalized 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.

(4) DBRS’s assessment of the collateralized loan obligation management capabilities of PGIM, Inc.

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 principle 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 in connection with this rating action.

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