DBRS and Morningstar Credit Ratings (MCR) Provide Additional Information on Legacy MCR-Rated U.S. CLOs Collateralized by Broadly Syndicated Bank Loans

On July 11, 2019, Morningstar Credit Ratings, LLC (MCR) and DBRS, Inc. (DBRS; together, DBRS Morningstar) published their first announcement regarding the integration of their respective analytical teams focused on the U.S. Structured Finance market. Today’s press release is the forty-second in a series to keep the market updated on analytical integration decisions and is focused on MCR-rated U.S. collateralized loan obligations (CLOs) collateralized by broadly syndicated bank loans (the Legacy MCR-Rated U.S. BSL CLOs Transactions).

<a href="https://www.dbrs.com/research/347875/" target="_blank">"DBRS and Morningstar Credit Ratings Announce Analytical Integration Process and Ratings Overlap"</a>

As announced on July 23, 2020, DBRS Morningstar expects to assign DBRS Morningstar ratings to the relevant Legacy MCR-Rated U.S. BSL CLO Transactions using the following DBRS Morningstar methodologies (collectively, the DBRS Morningstar CLO Methodologies):

<a href="https://www.dbrs.com/research/364310/" target="_blank">(1) “Rating CLOs and CDOs of Large Corporate Credit” (July 21, 2020)</a>

<a href="https://www.dbrs.com/research/364311/" target="_blank">(2) “Cash Flow Assumptions for Corporate Credit Securitizations” (July 21, 2020)</a>

<a href="https://www.dbrs.com/research/366977/" target="_blank">(3) “Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits” (September 22, 2020)</a>

As announced on August 31, 2020, DBRS Morningstar expects to assign successor DBRS Morningstar ratings only upon request for a successor DBRS Morningstar rating from the party that engaged MCR to rate a Legacy MCR-Rated U.S. BSL CLO Transaction.

Prior to assigning ratings using the DBRS Morningstar CLO Methodologies, for an interim period, DBRS Morningstar will use MCR’s <a href="https://www.dbrs.com/research/367235/" target="blank">"U.S. CLO Ratings Methodology"</a> and <a href="https://www.dbrs.com/research/367236/" target="blank">"U.S. ABS General Ratings Methodology"</a> (together, the MCR U.S. CLO Rating Methodologies) to assign successor DBRS Morningstar ratings to the Legacy MCR-Rated U.S. BSL CLO Transactions on or before October 15, 2020. DBRS Morningstar will monitor these ratings using the MCR U.S. CLO Rating Methodologies until these ratings are updated using the DBRS Morningstar CLO Methodologies.

Because DBRS Morningstar recently closed the request for comment period on and finalized the DBRS Morningstar CLO Methodologies, DBRS Morningstar also expects to concurrently place these new DBRS Morningstar ratings Under Review—Analytical Integration Review, until such time that DBRS Morningstar applies the DBRS Morningstar CLO Methodologies and takes any related rating actions. Thereafter, DBRS Morningstar will monitor these ratings in accordance with the DBRS Morningstar CLO Methodologies. Following the application of the DBRS Morningstar CLO Methodologies to these ratings, DBRS Morningstar will not use MCR’s U.S. CLO Rating Methodologies to assign or monitor any ratings in any U.S. CLO asset classes.

Upon issuance, the DBRS Morningstar ratings on the relevant Legacy MCR-Rated U.S. BSL CLO Transactions, so long as they remain Under Review—Analytical Integration Review and are monitored in accordance with the MCR U.S. CLO Rating Methodologies, may not be of comparable credit quality as the DBRS Morningstar ratings on other outstanding U.S. CLO transactions assigned or monitored, as applicable, in accordance with the DBRS Morningstar CLO Methodologies. Accordingly, DBRS Morningstar’s placement of the relevant ratings Under Review—Analytical Integration Review, similar to use of other “review status” designations by DBRS Morningstar, when appropriate, may indicate a difference in the credit quality of the ratings compared with other DBRS Morningstar ratings that are not Under Review.

MCR expects to withdraw its outstanding ratings on the Legacy MCR-Rated U.S. BSL CLO Transactions on or about October 15, 2020. Until such time, the outstanding MCR ratings on U.S. BSL CLO transactions will remain Under Review—Analytical Integration Review and MCR will continue to monitor these ratings in accordance with the MCR U.S. CLO Rating Methodologies.

For a list of the U.S. BSL CLO transactions that MCR publicly rates, please refer to Appendix A.

For more information related to MCR’s rating actions on its outstanding U.S. CLO transactions taken on November 11, 2019, please refer to the following rating announcement:

<a href="https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=MHFEx591XfQ%3d&m=i0Pyc%2bx7qZZ4%2bsXnymazBA%3d%3d&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d" target="_blank">"Morningstar Credit Ratings Places Ratings on U.S. CLO Transactions Under Review"</a>

For more information on the finalization of the DBRS Morningstar CLO Methodologies, please refer to the following press release:

<a href="https://www.dbrs.com/research/364312/" target="_blank">"DBRS Morningstar Updates Rating CLOs and CDOs of Large Corporate Credit and Cash Flow Assumptions for Corporate Credit Securitization Methodologies"</a>

For analytical inquiries regarding this press release, please contact Jerry van Koolbergen, Managing Director, U.S. Structured Credit.

DBRS
Jerry van Koolbergen
[email protected]
+1 212 806-3260

For rating engagement inquiries regarding the U.S. Structured Credit asset class coverage or any asset classes not listed, please contact Sean O’Connor, Managing Director, Head of Global Business Development.

DBRS
Sean O’Connor
[email protected]
+1 212 806-3252

For more information on the transactions rated by DBRS, please visit www.dbrsmorningstar.com or contact DBRS at [email protected]. For transactions rated by MCR, please visit http://www.morningstarcreditratings.com or contact [email protected].

DBRS
Stephen Bernard
[email protected]
+1 212 806-3240

APPENDIX A
U.S. BSL CLO Transactions Publicly Rated by MCR

-- AIG CLO 2018-1, Ltd
-- AIG CLO 2019-1, Ltd
-- Allegro CLO IX, Ltd
-- Allegro CLO V
-- Apidos CLO XXV
-- Ares XLVI CLO Ltd
-- Ares XXXIR CLO Ltd
-- Auburn CLO, Ltd.
-- Bain Capital Credit CLO 2017-1, Limited
-- Bain Capital Credit CLO 2018-2, Limited
-- Benefit Street Partners CLO XI, Ltd
-- Benefit Street Partners CLO XV, Ltd
-- Buckhorn Park CLO Ltd
-- CBAM 2017-1, Ltd
-- CBAM 2017-2, Ltd
-- CBAM 2018-5, Ltd
-- CBAM 2018-7, Ltd
-- CBAM 2018-8, Ltd
-- CBAM 2019-9, Ltd
-- Dryden 47 Senior Loan Fund
-- Dryden 61 CLO, Ltd
-- Galaxy XX CLO, Ltd
-- Hayfin Kingsland VIII, Ltd
-- Hempstead II CLO Ltd
-- HPS Loan Management 9-2016, Ltd
-- ICG US CLO 2017-2, Ltd
-- ICG US CLO 2018-3, Ltd
-- Jamestown CLO VI-R, Ltd
-- Jamestown CLO X Ltd
-- KKR CLO 9 Ltd
-- KKR CLO 11 Ltd
-- KKR CLO 19 Ltd
-- KKR CLO 21 Ltd
-- Magnetite XXI, Limited
-- Mariner CLO 6, Ltd
-- Mercer Field II CLO Ltd.
-- Octagon Investment Partners 24, Ltd
-- Octagon Investment Partners 28, Ltd
-- Parallel 2018-2 Ltd
-- Peaks CLO 3, Ltd
-- Race Point X CLO, Limited
-- Salem Fields CLO, Ltd.
-- Voya CLO 2016-4, Ltd
-- Voya CLO 2017-4, Ltd
-- Wind River 2016-2 CLO Ltd
-- Wind River 2017-2 CLO Ltd