DBRS Morningstar Updates Ratings on Issued by BlackRock DLF IX 2019-G CLO, LLC

DBRS, Inc. (DBRS Morningstar) confirmed its ratings of AAA (sf) on the Class A-1 Notes and AA (sf) on the Class A-2 Notes issued by BlackRock DLF IX 2019-G CLO, LLC (the Issuer). DBRS Morningstar upgraded four ratings as follows: the Class B Notes to A (high) (sf) from A (sf), the Class C Notes to A (sf) from BBB (sf), the Class D Notes to BBB (sf) from BB (sf), and the Class E Notes to BB (sf) from B (sf) (together, the Secured Notes). DBRS Morningstar also assigned a rating of B (sf) to the Issuer’s Class W Notes (together with the Secured Notes, the Notes). DBRS Morningstar discontinued its rating on the Combination Notes, pursuant to the Amended and Restated Note Purchase and Security Agreement (NPSA) dated as of December 23, 2020, among the Issuer; the U.S. Bank National Association (rated AA (high) with a Negative trend by DBRS Morningstar) as the Collateral Agent, Custodian, Document Custodian, Collateral Administrator, Information Agent, and Note Agent; and the Purchasers referred to therein. The discontinuation of the rating on the Combination Notes reflects the repayment in full of the Combination Notes by way of a redemption in kind with the corresponding underlying components of the Secured Notes, which fully reduced the Combination Note Rated Principal Balance, pursuant to the terms of the NPSA.

The ratings on the Class A-1 and A-2 Notes address the timely payment of interest (excluding the interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of October 16, 2029. The ratings on the Class B, C, D, E, and W Notes address the ultimate payment of interest (excluding the interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of October 16, 2029.

The principal methodology used to rate the Notes is “Rating CLOs and CDOs of Large Corporate Credit,” which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The Notes are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer will be managed by BlackRock Capital Investment Advisors, LLC (BCIA), which is a wholly owned subsidiary of BlackRock, Inc. DBRS Morningstar considers BCIA to be an acceptable collateralized loan obligation (CLO) manager.

The ratings reflect the following:

(1) The Amended and Restated NPSA dated as of December 23, 2020;
(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 CLO management capabilities of BCIA.

To assess portfolio credit quality, DBRS Morningstar provides a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio that DBRS Morningstar doesn’t already rate. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that help when rating a facility.

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-fourth of confirmed cases worldwide. The coronavirus pandemic has negatively affected not only the economies of the countries with the highest infection rates, 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 in its “Global Macroeconomic Scenarios: December Update” 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 commentary. The adjustments include a higher default assumption for the weighted-average (WA) credit quality of the current collateral obligation portfolio. To derive the higher default assumption, DBRS Morningstar notches ratings for obligors in certain industries and obligors at various rating levels based on their perceived exposure to the adverse disruptions caused by the coronavirus. Considering a higher default assumption would result in losses that exceed the original default expectations for the affected classes of notes. DBRS Morningstar may adjust the default expectations further if there are changes in the duration or severity of the adverse disruptions.

For CLOs, DBRS Morningstar ran an additional higher default adjustment on the WA DBRS Morningstar Risk Score of the current collateral obligation pool and then ran this adjusted modeling pool through the DBRS Morningstar CLO Asset Model to generate a stressed default rate. DBRS Morningstar then performed a cash flow model analysis to determine the breakeven default rate for the rated debt. The breakeven default rate is computed over nine combinations of default timing and interest rate stresses. The breakeven default rate must exceed the lifetime total default rate generated by the DBRS Morningstar CLO Asset Model for the debt to achieve the rating. The results of this adjustment indicate that the Notes can withstand an additional higher default stress commensurate with a moderate-scenario impact of the coronavirus pandemic.

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 https://www.dbrsmorningstar.com/research/359679; its April 22, 2020, commentary “Global Macroeconomic Scenarios: Application to Credit Ratings” at https://www.dbrsmorningstar.com/research/359903; its July 22, 2020, updated commentary, “Global Macroeconomic Scenarios: July Update” at https://www.dbrsmorningstar.com/research/364318; its September 10, 2020, updated commentary “DBRS Morningstar: Global Macroeconomic Scenarios: September Update” at https://www.dbrsmorningstar.com/research/366543; and its December 2, 2020, updated commentary “DBRS Morningstar: Global Macroeconomic Scenarios: December Update” at https://www.dbrsmorningstar.com/research/370672.

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).”

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 (DBRS Morningstar) for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action occurred on September 30, 2020, when all classes were confirmed.

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: Quan Yoon, CFA, Assistant Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Head of U.S. Structured Credit
Initial Rating Date: October 17, 2019

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

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