DBRS Morningstar Assigns Provisional Credit Ratings to the Loans of BTC Holdings Fund III-B LLC

DBRS, Inc. (DBRS Morningstar) assigned the following provisional credit ratings to the Class A-D Loans, the Class A-R Loans, and the Class A-T Loans (together, the Loans) issued by BTC Holdings Fund III-B LLC, pursuant to the Credit Agreement, dated as of December 20, 2023, entered into by and among BTC Holdings Fund III-B LLC, as the Borrower, The Bank of Nova Scotia, as the Administrative Agent, Citibank, N.A. as the Collateral Agent, Alter Domus (US) LLC, as the Collateral Administrator and Collateral Custodian, and the Lenders party thereto:

-- Class A-D Loans at AA (sf)
-- Class A-R Loans at AA (sf)
-- Class A-T Loans at AA (sf)

The provisional credit ratings on the Loans address the timely payment of interest (excluding the Excess Interest Amounts and the additional 2% interest payable at the Post-Default Rate, as defined in the Credit Agreement) and the ultimate payment of principal on or before the Stated Maturity (as defined in the amended Credit Agreement).

CREDIT RATING RATIONALE

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

The credit ratings reflect the following primary considerations:

(1) The Credit Agreement, dated as of December 20, 2023.
(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 Blue Torch Capital.

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 credit ratings; rather, they represent a model-driven default probability for each obligor that is used in assigning credit ratings to a facility.

DBRS Morningstar's credit ratings on the Loans address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations include the interest at the Applicable Rate, Commitment Fees, and principal amounts of the Loans (each capitalized term as defined in the Credit Agreement).

DBRS Morningstar's credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings on the Loans do not address Excess Interest Amounts, the additional 2% interest payable at the Post-Default Rate, nor Increased Costs.

DBRS Morningstar's long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

The transaction assumptions consider DBRS Morningstar's baseline macroeconomic scenarios for rated sovereign economies, available in its commentary "Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2023 Update," published on December 19, 2023 (https://www.dbrsmorningstar.com/research/425506). These baseline macroeconomic scenarios replace DBRS Morningstar's moderate and adverse pandemic scenarios, which were first published in April 2020.

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)": https://www.dbrsmorningstar.com/research/361112.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/416784 (July 4, 2023).

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

The principal methodology applicable to the credit rating is the Global Methodology for Rating CLOs and Corporate CDOs and the DBRS Morningstar CLO Insight Model (v.1.0.0.0) (October 22, 2023; https://www.dbrsmorningstar.com/research/422269).

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned Loans and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned Loans is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

DBRS, Inc.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for U.S. Structured Finance (December 7, 2023), https://www.dbrsmorningstar.com/research/425081

-- Operational Risk Assessment for Collateralized Loan Obligations (CLOs) and Corporate Collateralized Debt Obligations (CDOs) (September 14, 2023), https://www.dbrsmorningstar.com/research/420608

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023), https://www.dbrsmorningstar.com/research/415687

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