Press Release

DBRS Morningstar Confirms Rating of Class A Notes Issued by CBAM 2018-5, Ltd., Removes Under Review for Analytical Integration Status

Structured Credit
December 03, 2020

DBRS, Inc. (DBRS Morningstar) confirmed its rating of AAA (sf) and removed the Under Review – Analytical Integration Review status designation on the Class A Notes (the Notes) issued by CBAM 2018-5, Ltd. as Issuer and CBAM 2018-5, LLC as Co-Issuer (together, with the Issuer, the Co-Issuers).

The rating on the Notes was issued pursuant to the Indenture, dated as of March 29, 2018, between the Co-Issuers and U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar), as Trustee.

The rating on the Notes addresses the timely payment of interest and the ultimate payment of principal in accordance with the terms of the Indenture referred to above.

The Notes issued by the Co-Issuers are collateralized primarily by a portfolio of U.S. senior secured floating-rate broadly syndicated corporate loans. The collateralized loan obligation (CLO) is managed by CBAM CLO Management, LLC (CBAM), an affiliate of CBAM Partners, LLC, as Collateral Manager. DBRS Morningstar considers CBAM to be an acceptable CLO manager.

The rating on the Notes was confirmed and the Under Review – Analytical Integration Review status designation was removed pursuant to the application of DBRS Morningstar’s “Rating CLOs and CDOs of Large Corporate Credit,” “Cash Flow Assumptions for Corporate Credit Securitizations,” and “Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits” methodologies (collectively, the DBRS Morningstar CLO Methodologies). Hereafter, DBRS Morningstar will monitor the rating in accordance with the DBRS Morningstar CLO Methodologies.

As previously disclosed in the DBRS Morningstar press release, “DBRS Morningstar Assigns New Ratings to U.S. CLOs Backed by Broadly Syndicated Bank Loans,” dated October 13, 2020, DBRS Morningstar’s rating assigned to the Notes was a successor rating to the previously withdrawn associated rating of Morningstar Credit Ratings, LLC (MCR), a former credit rating affiliate of DBRS Morningstar, in accordance with MCR’s engagement letter covering the Notes. Information about the relevant previous MCR rating, including the history of the relevant previous MCR rating, can be found at

Accordingly, the above DBRS Morningstar rating reflects the following primary considerations:

(1) DBRS Morningstar’s application of its DBRS Morningstar CLO Methodologies, which set forth key analytical considerations and applicable analytics used when DBRS Morningstar assigns and monitors credit ratings.
(a) DBRS Morningstar uses a predictive model (the publicly available CLO Asset Model) to determine a ratings-based pool default-rate (the Stressed Default Rate) and that can be equated with a certain credit rating. Based on inputs into the predictive model, such as obligor credit quality, obligor and industry diversification, and term to maturity, the predictive model then generates a level of cumulative default stress appropriate for each rating category.
(b) DBRS Morningstar then performs cash flow analysis using a proprietary cash flow engine, which incorporates inputs such as the Stressed Default Rate, as well as assumptions relating to principal amortization, amount of interest generated, default timing, recoveries, and movement in interest rate curves, among other considerations. The output of this cash flow analysis is referred to as the breakeven default rate (BDR).
(c) DBRS Morningstar assigns ratings based on a comparison of the BDR results of the cash flow analysis as it compares to the Stressed Default Rate output from the default probability model.

(2) DBRS Morningstar notes that a legal analysis, which included but was not limited to legal opinions and various transaction documents, was performed by MCR. In addition, MCR engaged external counsel as part of its process of assigning new ratings to the CLOs on or prior to the closing date. DBRS Morningstar did not perform additional legal analysis for the purpose of assigning or monitoring ratings to the Notes, unless otherwise indicated in this press release.

(3) The Indenture, dated as of March 29, 2018, as amended from time to time.

(4) The integrity of the transaction structure.

(5) DBRS Morningstar’s assessment of the portfolio quality.

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

(7) DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of CBAM as Collateral Manager.

(8) DBRS Morningstar reviewed key transaction performance indicators reported in periodic remittance reports since the closing date.

As the Coronavirus Disease (COVID-19) spread around the world, certain countries imposed quarantines and lockdowns, including the United States, which accounts for more than one-quarter of confirmed cases worldwide. The coronavirus pandemic has negatively affected not only the economies of the nations most afflicted, but also the overall global economy with diminished demand for goods and services as well as disrupted supply chains. The effects of the pandemic may result in deteriorated financial conditions for many companies and obligors, some of which will experience the effects of such negative economic trends more than others. At the same time, governments and central banks in multiple regions, including the United States and Europe, have taken significant measures to mitigate the economic fallout from the coronavirus pandemic.

In conjunction with DBRS Morningstar’s commentary, “Global Macroeconomic Scenarios: Implications for Credit Ratings,” published on April 16, 2020, and updated on December 2, 2020, DBRS Morningstar further considers additional adjustments to assumptions for the CLO asset class that consider the moderate economic scenario outlined in the commentaries. After a review of the transaction’s historical performance, current portfolio, and publicly available rating agency commentary, DBRS Morningstar decided that the collateral credit ratings reflect the economic risk of the coronavirus.

For more information regarding DBRS Morningstar’s simplified set of macroeconomic scenarios for select economies related to the coronavirus, please see its April 16, 2020, commentary “Global Macroeconomic Scenarios: Implications for Credit Ratings” at; its April 22, 2020, commentary “Global Macroeconomic Scenarios: Application to Credit Ratings” at; and its December 2, 2020, updated commentary “Global Macroeconomic Scenarios: December Update” at

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the coronavirus, please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:

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

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit (July 21, 2020), which can be found on under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

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.

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

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