DBRS Morningstar Confirms and Upgrades Ratings on the Secured Notes Issued by VCP CLO II, Ltd.

DBRS, Inc. (DBRS Morningstar) upgraded its ratings on two classes of notes issued by VCP CLO II, Ltd. (the Issuer of VCP CLO II) and VCP CLO II, LLC (the Co-Issuer; together, with the Issuer, the Co-Issuers) pursuant to the Indenture dated as of March 4, 2021, by and among the Co-Issuers and Wells Fargo Bank, National Association as the Trustee, as follows:

-- Class D Notes to BBB (sf) from BBB (low) (sf)
-- Class E Notes to BB (sf) from BB (low) (sf)

In addition, DBRS Morningstar confirmed its ratings on the remaining classes of notes as follows:

-- Class A-1 Notes at AAA (sf)
-- Class A-2 Notes at AAA (sf)
-- Class B-1 Notes at AA (sf)
-- Class B-2 Notes at AA (sf)
-- Class C Notes at A (sf)

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

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. an acceptable CLO manager.

The ratings reflect the following primary considerations:

(1) The Indenture 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.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the Coronavirus Disease (COVID-19), 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 methodologies are Rating CLOs and CDOs of Large Corporate Credit (January 26, 2022) and Cash Flow Assumptions for Corporate Credit Securitizations (January 26, 2022), 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.

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:

Each of the principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. The “CLOs and CDOs of Large Corporate Credit” (January 26, 2022) methodology provides an general overview of the entire rating process and details on asset analysis. The “Cash Flow Assumptions for Corporate Credit Securitization" (January 26, 2022) methodology outlines the assumptions and analytical approach used in cash flow analysis.

The last rating action on this transaction took place on March 4, 2021.

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: Quan Yoon, Vice President, US 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.
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New York, NY 10005 USA
Tel. +1 212 806-3277

-- Rating CLOs and CDOs of Large Corporate Credit and CLO Asset Model Version 2.2.3.1 (January 26, 2022),
https://www.dbrsmorningstar.com/research/391226

-- Cash Flow Assumptions for Corporate Credit Securitizations (January 26, 2022),
https://www.dbrsmorningstar.com/research/391225

-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 20, 2021),
https://www.dbrsmorningstar.com/research/384628/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 (June 10, 2021),
https://www.dbrsmorningstar.com/research/379958/interest-rate-stresses-for-us-structured-finance-transactions

-- Legal Criteria for U.S. Structured Finance (December 15, 2021),
https://www.dbrsmorningstar.com/research/389789