DBRS Morningstar Confirms Ratings on the Class A-1 Notes Issued by Garrison Funding 2018-2 Ltd.

DBRS, Inc. (DBRS Morningstar) confirmed its ratings of AAA (sf) on the Class A-1R-R Senior-Secured Revolving Floating-Rate Notes (the Class A-1R-R Notes) and on the Class A-1T-R Senior-Secured Floating-Rate Notes (the Class A-1T-R Notes; together with the Class A-1R-R Notes, the Class A-1 Notes) issued by Garrison Funding 2018-2 Ltd. (the Issuer or Garrison CLO) pursuant to the Indenture dated as of October 18, 2018, among the Issuer; Garrison Funding 2018-2 LLC as Co-Issuer; and Deutsche Bank Trust Company Americas (rated A (low) with a Negative trend by DBRS Morningstar), as Trustee.

The rating on the Class A-1R-R Notes addresses the timely payment of interest up to the Interest Rate Cap (as defined in the Indenture) and the ultimate payment of principal on or before the Stated Maturity (as defined in the Indenture). The rating on the Class A-1R-R does not address the payment of any Class A-1R Note Additional Amount (as defined in the Indenture). The rating on the Class A-1T-R Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Stated Maturity (as defined in the Indenture).

The Secured Notes (as defined in the Indenture) issued by Garrison CLO are collateralized primarily by a portfolio of U.S. senior-secured middle-market corporate loans and will be managed by Garrison Capital Inc. (GCI) as Collateral Manager and Garrison Capital Advisers LLC (GCA) as Sub-Collateral Manager. Both the Collateral Manager and the Sub-Collateral Manager are affiliates of Garrison Investment Group LP (Garrison).

The ratings reflect the following:

(1) The Indenture dated as of October 18, 2018;
(2) The integrity of the transaction structure;
(3) DBRS Morningstar’s assessment of the portfolio quality;
(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios; and
(5) DBRS Morningstar’s assessment of the origination, servicing and collateralized loan obligation management capabilities of GCI, GCA and Garrison.

To assess portfolio credit quality, DBRS Morningstar provides a credit estimate or internal assessment for each non-financial corporate obligor in the portfolio not rated by DBRS Morningstar. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that is used in assigning a rating to the facility.

The Events of Default (EOD) contain an EOD Overcollateralization Ratio trigger; however, the Assets securing the Secured Notes may not be sold unless the Trustee determines that the liquidation proceeds would be sufficient to repay all interest and principal on the Secured Notes, or Holders of at least a majority of each Class of Secured Notes (voting separately by Class) consent to and direct the sale and liquidation of the Assets (all capitalized terms as defined in the Indenture).

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

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit, which can be found on www.dbrs.com under Methodologies & Criteria.

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on October 18, 2018.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Arthur Krivoruk, Financial Analyst, U.S. Structured Credit – Global Structured Finance
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Head of U.S. Structured Credit
Initial Rating Date: September 21, 2018.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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