DBRS Morningstar Confirms Rating on Class A Notes Issued by AIG CLO 2019-1, Ltd.

DBRS, Inc. (DBRS Morningstar) confirmed its rating of AAA (sf) on the Class A Notes issued by AIG CLO 2019-1, Ltd. as the Issuer and AIG CLO 2019-1, LLC as the Co-Issuer (together, with the Issuer, the Co-Issuers).

The rating on the Class A Notes (the Notes) was issued pursuant to the Indenture, dated as of March 21, 2019, among AIG CLO 2019-1, Ltd., as the Issuer; AIG CLO 2019-1, LLC, as the Co-Issuer; and U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar), as the 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. At issuance, the collateralized loan obligation (CLO) manager for this transaction was Covenant Credit Partners, which is an affiliate of AIG Asset Management (U.S.), LLC (AMG or the Investment Manager). As of the date of this press release, AMG has since entered into and executed an Assignment Agreement, dated as of December 8, 2020, by and among AMG and AIG Credit Management, LLC (ACM or the Successor Investment Manager), also an affiliate of AGM.

Subject to the terms of the Assignment Agreement, the existing Investment Manager assigned all of its rights, title, and interest in and to its obligations under the Investment Management Agreement, dated as of March 21, 2019, by and between AMG and the Issuer. Pursuant to Section 18(b) of the Investment Management Agreement, and effective as of January 1, 2021, the Investment Manager has assigned its rights and delegated its duties under the Investment Management Agreement to affiliate ACM. DBRS Morningstar considers AMG and ACM to each be an acceptable collateralized loan (CLO) manager.

DBRS Morningstar confirmed the rating on the Notes pursuant to the application of its “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). DBRS Morningstar will continue to monitor the rating in accordance with the DBRS Morningstar CLO Methodologies.

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

(1) DBRS Morningstar’s application of the 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) 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 Morningstar Credit Ratings, LLC, which also 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 21, 2019, 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 AIG Asset Management as the CLO Asset Manager.

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

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 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 Sovereigns group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts with the baseline scenarios set forth in the following report:
https://www.dbrsmorningstar.com/research/384150.

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 www.dbrsmorningstar.com or contact us at [email protected].

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