Morningstar DBRS Confirms its Credit Ratings, Removes Under Review with Developing Implications Status on the Advances Issued by TPR Funding 2022-1, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings and removed the Under Review with Developing Implications status on the Class A-1 Advances, the Class A-2 Advances, the Class B Advances, the Class C Advances, the Class D Advances, and the Class E Advances (together, the Advances) issued by TPR Funding 2022-1, LLC pursuant to the Loan, Security and Servicing Agreement, dated as of December 15, 2022 (the Loan Agreement), entered into by and among TPR Funding 2022-1, LLC as the Borrower; Delaware Life Insurance Company as the Servicer; Capital One, National Association (rated “A” with a Stable trend by Morningstar DBRS) as the Administrative Agent, Hedge Counterparty, and Arranger; Citibank, N.A. (rated AA (low) with a Stable trend by Morningstar DBRS) as the Collateral Custodian and Document Custodian; Virtus Group, LP as the Collateral Administrator; and each of the Lenders and Subordinated Lenders from time to time party thereto:

-- Class A-1 Advances at AA (sf)
-- Class A-2 Advances at AA (low) (sf)
-- Class B Advances at A (low) (sf)
-- Class C Advances at BBB (low) (sf)
-- Class D Advances at BB (low) (sf)
-- Class E Advances at B (low) (sf)

The credit rating on the Class A-1 Advances addresses the timely payment of interest (other than Interest attributable to Excess Interest Amounts, as defined in the Loan Agreement referred to above) and the ultimate payment of principal on or before the Facility Maturity Date (as defined in the Loan Agreement referred to above). The credit ratings on the Class A-2 Advances, the Class B Advances, the Class C Advances, the Class D Advances, and the Class E Advances address the ultimate payment of interest (other than Interest attributable to Excess Interest Amounts, as defined in the Loan Agreement referred to above) and the ultimate payment of principal on or before the Facility Maturity Date (as defined in the Loan Agreement referred to above).

The Advances are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The servicer for TPR Funding 2022-1, LLC is Delaware Life Insurance Company. Morningstar DBRS considers Delaware Life Insurance Company to be an acceptable collateralized loan obligation (CLO) servicer.

CREDIT RATING RATIONALE
The confirmations are the result of Morningstar DBRS’ review of the transaction performance by applying the “Global Methodology for Rating CLOs and Corporate CDOs” (the CLO Methodology), released on October 22, 2023. On November 9, 2023, the credit ratings were placed Under Review with Developing Implications to allow for Morningstar DBRS to review the credit ratings using the CLO Methodology. The Scheduled Revolving Period End Date is December 15, 2025. The Facility Maturity Date is December 15, 2032.

Morningstar DBRS monitors transaction performance metrics based on the periodicity of the transaction’s reporting. The performance metrics include Collateral Quality Tests, Coverage Tests, Concentration Limitations, and Performing Collateral Par. As of October 15, 2023, the Issuer is in compliance with all performance metrics except its non-BSL Covenant-Lite Loan Concentration Limit. However, as the Issuer is passing its Minimum Weighted-Average Recovery Rate Test and is still in the Revolving Period, Morningstar DBRS considers the test failure to not be material and therefore confirmed its credit ratings on the Advances, as the current transaction performance is within Morningstar DBRS’ expectation.

Some of the performance metrics that Morningstar DBRS reviewed are listed below:

Collateral Quality Tests
Minimum Weighted-Average Spread Test: Threshold 5.25%; Current 5.93%
Minimum Weighted-Average Recovery Rate Test: Threshold 51.90%; Current 52.72%
Minimum Diversity Test: Threshold 20; Current 21
Maximum Weighted-Average Life Test: Threshold 5.00 Years; Current 3.43 Years
Maximum Morningstar DBRS Risk Test: Threshold 29.70; Current 27.01

Coverage Tests
Total Interest Coverage Ratio Test: Threshold 150.00%; Current 198.89%
Class A-1 Overcollateralization Ratio Test: Threshold 142.86%; Current 148.70%
Class A-2 Overcollateralization Ratio Test: Threshold 138.15%; Current 148.16%
Class B Overcollateralization Ratio Test: Threshold 118.21%; Current 128.21%
Class C Overcollateralization Ratio Test: Threshold 113.21%; Current 121.22%
Class D Overcollateralization Ratio Test: Threshold 112.68%; Current 106.68%
Class E Overcollateralization Ratio Test: Threshold 150.00%; Current 198.89%

In its analysis, Morningstar DBRS also considered the following aspects of the transaction:

(1) The transaction’s capital structure and the form and sufficiency of available credit enhancement.
(2) Relevant credit enhancement in the form of subordination and excess spread.
(3) The ability of the Advances to withstand projected collateral loss rates under various cash flow stress scenarios.
(4) The credit quality of the underlying collateral and the ability of the transaction to reinvest Principal Proceeds into new Collateral Obligations, subject to the Eligibility Criteria, which include testing the Concentration Limitations, Collateral Quality Tests, and Coverage Tests.
(5) Morningstar DBRS’ assessment of the origination, servicing, and CLO management capabilities of Delaware Life Insurance Company.
(6) The legal structure as well as legal opinions addressing certain matters of the Borrower and the consistency with the Morningstar DBRS “Legal Criteria for U.S. Structured Finance” methodology.

The transaction has a dynamic structural configuration that permits variations of certain asset metrics via a selection of an applicable row from a collateral quality matrix (the CQM, as defined in Schedule V of the Loan Agreement). Depending on a given Diversity Score, the following metrics are selected accordingly from the applicable row of the CQM: Morningstar DBRS Risk Score and Weighted-Average Spread. Morningstar DBRS analyzed each structural configuration as a unique transaction, and all configurations (matrix points) passed the applicable Morningstar DBRS credit rating stress levels. The Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modeled during its analysis are presented below.

Some particular strengths of the transaction are (1) the collateral quality, which will consist mostly of senior-secured middle-market loans; and (2) the expected adequate diversification of the portfolio of collateral obligations (Diversity Score, matrix driven). Some challenges are (1) the expected weighted-average credit quality of the underlying obligors may fall below investment grade (per the CQM), and the majority may not have public credit ratings once purchased and (2) the underlying collateral portfolio may be insufficient to redeem the Advances in an Event of Default.

The transaction is performing according to the contractual requirements of the Loan, Security and Servicing Agreement. There were no defaults registered in the underlying portfolio to date. Considering the transaction performance, its legal aspects and structure, Morningstar DBRS confirmed its credit ratings on the Advances.

To assess portfolio credit quality, Morningstar DBRS provides a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio not rated by Morningstar DBRS. Credit estimates are not credit ratings; rather, they represent a model-driven default probability for each obligor that Morningstar DBRS uses when rating the Advances.

The transaction assumptions consider Morningstar DBRS’ 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://dbrs.morningstar.com/research/425506). These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse pandemic scenarios, which were first published in April 2020.

For more information regarding Morningstar DBRS’ additional adjustment for select industries related to COVID-19, please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at https://dbrs.morningstar.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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

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 (October 22, 2023), https://dbrs.morningstar.com/research/422269.

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

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.

Morningstar DBRS 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.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

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

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

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

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.