DBRS Morningstar Assigns Provisional Ratings to the Secured Notes to be Issued by VCP CLO II, Ltd.

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, Class B-2 Notes, Class C Notes, Class D Notes, and Class E Notes (together, the Secured Notes) to be issued by VCP CLO II, Ltd. (the Issuer or VCP CLO II) and VCP CLO II, LLC (the Co-Issuer; together, with the Issuer, the Co-Issuers) pursuant to the Indenture to be dated as of [March] [4], 2021, by and among the Co-Issuers and Wells Fargo Bank, National Association as the Trustee:

-- Class A-1 Notes rated AAA (sf)
-- Class A-2 Notes rated AAA (sf)
-- Class B-1 Notes rated AA (sf)
-- Class B-2 Notes rated AA (sf)
-- Class C Notes rated A (sf)
-- Class D Notes rated BBB (low) (sf)
-- Class E Notes rated BB (low) (sf)

The DBRS Morningstar provisional ratings on the Class A-1 Notes, Class A-2 Notes, Class B-1 Notes, and Class B-2 Notes address the Issuer’s ability to make timely payments of interest and ultimate payments of principal on or before the Stated Maturity. The DBRS Morningstar provisional ratings on the Class C Notes, Class D Notes, and Class E Notes address the Issuer’s ability to make ultimate payments of interest and ultimate payments of principal on or before the Stated Maturity.

VCP CLO II is a cash flow collateralized loan obligation (CLO) transaction that is collateralized primarily by a portfolio of U.S. senior secured broadly syndicated corporate loans and will be managed by Vista Credit Partners, L.P. DBRS Morningstar considers Vista Credit Partners, L.P. to be an acceptable collateralized loan obligation manager.

The provisional ratings reflect the following:

(1) The draft Indenture to be dated as of [March] [4], 2021.
(2) The integrity of the transaction’s structure.
(3) DBRS Morningstar’s assessment of the portfolio’s quality.
(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(5) DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of Vista Credit Partners, L.P.

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 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 its updated commentary, “Global Macroeconomic Scenarios: January 2021 Update,” published on January 28, 2021, DBRS Morningstar further considers additional adjustments to assumptions for the CLO asset class that consider the moderate economic scenario outlined in the commentary. After a review of the transaction’s target closing portfolio and publicly available ratings on the Collateral Obligations, DBRS Morningstar decided that the collateral credit ratings reflect the economic risk of the coronavirus, commensurate with a moderate-impact scenario.

For more information regarding DBRS Morningstar’s simplified set of macroeconomic scenarios for select economies related to the coronavirus, please see 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; and its January 28, 2021, updated commentary, Global Macroeconomic Scenarios: January 2021 Update, at https://www.dbrsmorningstar.com/research/372842.

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 https://www.dbrsmorningstar.com/research/361112.

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:
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 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 for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

These ratings concern expected to be issued new financial instruments. This is the first DBRS Morningstar rating action on these financial instruments.

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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Joseph Priolo, Senior Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: February 5, 2021

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

-- Rating CLOs and CDOs of Large Corporate Credit and DBRS CLO Asset Model Version 2.2.3 (July 21, 2020),
https://www.dbrsmorningstar.com/research/364310/rating-clos-and-cdos-of-large-corporate-credit

-- Cash Flow Assumptions for Corporate Credit Securitizations (July 21, 2020),
https://www.dbrsmorningstar.com/research/364311/cash-flow-assumptions-for-corporate-credit-securitizations

-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 22, 2020),
https://www.dbrsmorningstar.com/research/366977/operational-risk-assessment-for-collateralized-loan-obligation-clo-and-collateralized-debt-obligation-cdo-managers-of-large-corporate-credits

-- Interest Rate Stresses for U.S. Structured Finance Transactions (October 23, 2020),
https://www.dbrsmorningstar.com/research/368786/interest-rate-stresses-for-us-structured-finance-transactions

-- Legal Criteria for U.S. Structured Finance (December 21, 2020),
https://www.dbrsmorningstar.com/research/371685/legal-criteria-for-us-structured-finance