DBRS Morningstar Assigns AA (sf) Ratings to Class A-T-1 Loans, Confirms AA (sf) Ratings on the Class A-D, Class A-R, and Class A-T Loans of BTC Holdings Fund II LLC

DBRS, Inc. (DBRS Morningstar) assigned a AA (sf) rating to the Class A-T-1 Loans and confirmed its ratings of AA (sf) on the Class A-D Loans, the Class A-R Loans, and the Class A-T Loans (together with the Class A-T-1 Loans, the Loans) issued by BTC Holdings Fund II LLC.

The Loans were issued pursuant to the Credit Agreement dated as of July 1, 2021 (as amended by the First Amendment to the Credit Agreement dated as of September 1, 2021, and the Omnibus Amendment, dated as of April 5, 2022) (the Credit Agreement), and as further amended by the Third Amendment to the Credit Agreement, (the Third Amendment) dated as of May 27, 2022 (the Third Amendment Date), entered into by and among BTC Holdings Fund II, LLC as the Borrower, Natixis, New York Branch, as Administrative Agent, Citibank, N.A. as Collateral Agent, Alter Domus (US) LLC as Collateral Administrator and Collateral Custodian, and the Lenders party thereto.

The rating actions on the Loans reflect the execution of the Third Amendment to the Credit Agreement dated as of May 27, 2022. The rating actions do not signify DBRS Morningstar’s approval of the amendment or its opinion as to whether the amendment is beneficial or detrimental to the holders of the Loans.

The rating actions on the Loans address the timely payment of interest (excluding any Excess Interest Amounts, as defined in the Credit Agreement referred to above) and the ultimate payment of principal on or before the Stated Maturity (as defined in the Credit Agreement referred to above).

The Loans issued by BTC Holdings Fund II LLC are collateralized primary by a portfolio of U.S. middle-market corporate loans. BTC Holdings Fund II LLC is managed by Blue Torch Credit Opportunities Fund II LP (Blue Torch Capital). DBRS Morningstar considers Blue Torch Capital to be an acceptable collateralized loan obligation (CLO) manager.

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 ratings to a facility.

The ratings reflect the following primary considerations:

(1) The Third Amendment to the Credit Agreement, dated as of May 27, 2022.
(2) The Credit Agreement dated as of June 30, 2021, as amended from time to time.
(3) The integrity of the transaction structure.
(4) DBRS Morningstar’s assessment of the portfolio quality.
(5) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(6) DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of Blue Torch Capital.

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.

There were no Environmental, Social, or Governance factors or considerations with a significant or relevant impact on the credit rating. 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.

This is the first rating action since the Initial Rating Date.

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: Leila Manii, Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: July 1, 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 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

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 10, 2021),
https://www.dbrsmorningstar.com/research/379958

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