Morningstar DBRS Confirms Credit Ratings on the Class A-R Loans and Class A-T Loans of ABPCIC Funding IV, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Class A-R Loans and the Class A-T Loans (together, the Class A Loans) issued by ABPCIC Funding IV, LLC as follows:

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

The Class A Loans were issued pursuant to the Credit Agreement dated as of April 21, 2023, among ABPCIC Funding IV, LLC, as Borrower; Natixis, New York Branch, as Administrative Agent; U.S. Bank Trust Company, National Association as Collateral Agent and Collateral Administrator; and the Lenders referred to therein.

CREDIT RATING RATIONALE/DESCRIPTION
The rating action is a result of Morningstar DBRS's annual surveillance review of the transaction performance. The Reinvestment Period end date is October 21, 2024. The Final Maturity Date is April 21, 2033.

For the transaction performance review, Morningstar DBRS applied the Current Profile analysis, which is based on the actual pool of assets as reported in the trustee report dated as of May 13, 2024. The Current Profile analysis has produced satisfactory results. Given that the Class A Loans are performing within Morningstar DBRS' expectation, we confirmed the credit rating on the Class A Loans.

Some of the performance metrics that Morningstar DBRS reviewed are listed below:
(1) Overcollateralization Ratio: Subject to Collateral Quality Matrix; 141.54%
(2) Interest Coverage Ratio: 150.00%
(3) Maximum Diversity Score Test: Subject to Collateral Quality Matrix; 21
(4) Maximum Morningstar DBRS Risk Score Test: Subject to Collateral Quality Matrix; 34.00%
(5) Minimum WA Morningstar DBRS Recovery Rate Test: 49.40%
(6) Minimum WA Spread Test: 5.75%
(7) Minimum WA Fixed-Rate Coupon Test: 7.50%

Some particular strengths of the transaction are (1) the collateral quality, which will consist mostly of senior-secured middle-market loans; (2) the adequate diversification of the portfolio of collateral obligations (Diversity Score of 31 vs the threshold of 21 ); and (3) the Collateral Manager's expertise in CLOs and overall approach to selection of Collateral Obligations.

Some challenges were identified: (1) the expected WA credit quality of the underlying obligors may fall below investment grade, and the majority may not have public ratings, and (2) the underlying collateral portfolio may be insufficient to redeem the Class A Loans in an Event of Default.

As of May 13, 2024, trustee report, the transaction is failing one concentration limit in the third largest industry (13.3% vs the threshold of 12.5%). Morningstar DBRS considered this failure while analyzing the transaction performance in the Current Profile approach. Morningstar DBRS analyzed each loan in the pool separately by inputting its tenor, Morningstar DBRS rating, country of origin, and industry among others into the DBRS CLO Insight Model. The model-based analysis along with the cash flow engine output produced satisfactory results, which supported the credit rating confirmation on the Class A Loans.

Morningstar DBRS analyzed the transaction using the Morningstar DBRS CLO Insight Model and its proprietary cash flow engine, which incorporated assumptions regarding principal amortization, principal prepayment, amount of interest generated, principal prepayments, default timings, and recovery rates, among other credit considerations referenced in Morningstar DBRS' "Global Methodology for Rating CLOs and Corporate CDOs" (February 24, 2024; https://dbrs.morningstar.com/research/428544).

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 (January 23, 2024) https://dbrs.morningstar.com/research/427030.

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

The principal methodology applicable to the credit rating is Global Methodology for Rating CLOs and Corporate CDOs (February 23, 2024) and the CLO Insight Model v1.0.1.0. https://dbrs.morningstar.com/research/428544

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

The principal methodology applicable to the credit rating is Global Methodology for Rating CLOs and Corporate CDOs (February 23, 2024) and the CLO Insight Model v1.0.1.0. https://dbrs.morningstar.com/research/428544

Operational Risk Assessment for CLOs and CDOs (September 14, 2023)
https://dbrs.morningstar.com/research/420608

Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024)
https://dbrs.morningstar.com/research/428623

Legal Criteria for U.S. Structured Finance (April 15, 2024)
https://dbrs.morningstar.com/research/431205

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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