DBRS Morningstar Upgrades and Confirms Ratings on Notes Issued by TCP DLF VIII 2018 CLO, LLC

DBRS, Inc. (DBRS Morningstar) upgraded and confirmed its public ratings on the following Notes issued by TCP DLF VIII 2018 CLO, LLC (the Issuer) pursuant to the Note Purchase and Security Agreement dated as of February 28, 2018, among the Issuer; U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar) as Collateral Agent, Custodian, Collateral Administrator, Information Agent, and Note Agent; and the Purchasers referred to therein:

-- Class A-1 Notes confirmed at AAA (sf)
-- Class A-2 Notes confirmed at AA (high) (sf)
-- Class B Notes upgraded to AA (low) (sf) from A (high) (sf)
-- Class C Notes upgraded to A (low) (sf) from BBB (high) (sf)
-- Class D Notes confirmed at BB (high) (sf)
-- Class E Notes upgraded to BB (low) (sf) from B (high) (sf)

The ratings on the Class A-1 Notes and Class A-2 Notes address the timely payment of interest (excluding the additional 1% of interest payable at the Post-Default Rate as defined in the Note Purchase and Security Agreement) and the ultimate repayment of principal on or before the Stated Maturity (as defined in the Note Purchase and Security Agreement). The ratings on the Class B Notes, Class C Notes, Class D Notes, and Class E Notes address the ultimate payment of interest (excluding the additional 1% of interest payable at the Post-Default Rate as defined in the Note Purchase and Security Agreement) and the ultimate payment of principal on or before the Stated Maturity (as defined in the Note Purchase and Security Agreement).

The rationale for ratings upgrades on the Class B Notes, Class C Notes, and Class E Notes is the Reinvestment Period ended in February 2022, resulting in (1) $24 million of deleveraging on the rated liabilities, and (2) lower Stressed Portfolio Default Rates given the greater certainty around portfolio composition. The transaction otherwise performed within expectations.

The Notes issued by the Issuer are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer is managed by Series I of SVOF/MM, LLC (the Collateral Manager), a consolidated subsidiary of Tennenbaum Capital Partners, LLC, which is itself a wholly owned subsidiary of BlackRock, Inc. DBRS Morningstar considers Series I of SVOF/MM, LLC to be an acceptable collateralized loan obligation (CLO) manager.

The ratings reflect the following primary considerations:
-- The Note Purchase and Security Agreement dated as of February 28, 2018.
-- The integrity of the transaction structure.
-- DBRS Morningstar’s assessment of the portfolio quality.
-- Adequate credit enhancement to withstand DBRS Morningstar’s projected collateral loss rates under various cash flow-stress scenarios.
-- DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of Series I of SVOF/MM, LLC.

To assess portfolio credit quality, DBRS Morningstar provides a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio that DBRS Morningstar doesn’t already rate. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that help when rating a facility.

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.

There were no Environmental, Social, Governance factors that had a significant or relevant effect on the credit analysis. 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/396929 (May 17, 2022).

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/384482.

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, Specifically, the “Rating CLOs and CDOs of Large Corporate Credit” (January 26, 2022) methodology provides a 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.

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.

The last rating action on this transaction took place on September 24, 2021.

Lead Analyst: Quan Yoon, CFA, Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: February 28, 2018

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
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-- 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 (August 30, 2022),
https://www.dbrsmorningstar.com/research/402153

-- Legal Criteria for U.S. Structured Finance (June 15, 2022),
https://www.dbrsmorningstar.com/research/398418