DBRS Morningstar Assigns Provisional Ratings to Loans Issued by Whitney Funding, LLC

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Class A Loan, the Class B Loan, the Class C Loan, and the Class D Loan (collectively, the Loans) issued by Whitney Funding, LLC, pursuant to the terms of the Amended and Restated Loan Agreement (the Loan Agreement) dated as of December 10, 2021, among Whitney Funding, LLC as Borrower; Delaware Life Insurance Company as a Lender and the Managing Lender; and Alter Domus (US) LLC as the Paying Agent and Calculation Agent:

-- Class A Loan at A (high) (sf)
-- Class B Loan at BBB (low) (sf)
-- Class C Loan at BB (sf)
-- Class D Loan at B (low) (sf)

The provisional ratings on the Loans address the ultimate payment of interest and the ultimate payment of principal on or before the Legal Final Maturity Date of December 18, 2033. The Loans could have an earlier Maturity Date (as defined in the Loan Agreement) beginning in December 2023, if the proceeds from the liquidation of the assets of the Borrower, distributed pursuant to the Loan Agreement, would be sufficient so that, after such distribution, all interest and Deferred Interest (if any) due and payable and the outstanding principal amount of the Loans would be paid in full and the Aggregate Loan Balance reduced to zero.

A provisional rating is not a final rating with respect to the above-mentioned Loans and may change or be different than the final rating assigned or may be discontinued. The assignment of final ratings on the above-mentioned Loans is subject to receipt by DBRS Morningstar of all data and/or information and final documentation that DBRS Morningstar deems necessary to finalize the ratings, including, for these Loans: completion of the funding period, up to the Maximum Commitment Amount (as defined in the Loan Agreement), and satisfaction of the Portfolio Criteria (as defined in the Loan Agreement). Failure by the Borrower to complete the above conditions, as described in the Loan Agreement, may result in the provisional ratings not being finalized or being finalized at different ratings than the provisional ratings assigned.

Should a Distribution Event (as defined in the Loan Agreement) occur, the Designated Lender (as defined in the Loan Agreement) shall have the right at any time, upon written notice to the Borrower, the Paying Agent, and the Rating Agency, to instruct the Paying Agent to distribute the Borrower’s assets to the Designated Lenders. In consideration therefor, the Aggregate Loan Balance of the Loans will be reduced to zero and all obligations of the Borrower (except those which expressly survive the termination of the Loan Agreement) shall be deemed satisfied.

The Borrower is a bankruptcy-remote special-purpose vehicle set up by Delaware Life Insurance Company, as the Managing Lender and Servicer. At the time of closing, DBRS Morningstar understands that Delaware Life Insurance Company is the sole Lender to the Borrower (though Delaware Life Insurance Company may sell or assign the Loans following the closing). As such, as of this date, certain key parties to this transaction are related parties. In addition, Delaware Life Insurance Company engaged DBRS Morningstar for the determination of the credit ratings on the Loans.

The Loans issued by the Borrower are collateralized primarily by a portfolio of U.S. middle-market corporate loans. Whitney Funding, LLC will be managed by Delaware Life Insurance Company. DBRS Morningstar considers Delaware Life Insurance Company to be an acceptable collateralized loan obligation (CLO) manager.

The provisional ratings reflect the following primary considerations:
(1) The Loan Agreement, dated as of December 10, 2021.
(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.
(5) DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of Delaware Life Insurance Company.

To assess portfolio credit quality, DBRS Morningstar provides a credit estimate or internal assessment for each nonfinancial 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 Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many CLO transactions. The rating is based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit (February 8, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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

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