Morningstar DBRS Finalizes Credit Ratings on the Loans Issued by BTC Offshore Holdings Fund III-B LLC

DBRS, Inc. (Morningstar DBRS) finalized its following provisional credit ratings on the Class A-R Loans, Class A-T Loans, Class A-D-1 Loans, and Class A-D-2 Loans (together, the Loans) issued by BTC Offshore Holdings Fund III-B 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:

-- Class A-R Loans at AA (sf)
-- Class A-T Loans at AA (sf)
-- Class A-D-1 Loans at AA (sf)
-- Class A-D-2 Loans at AA (sf)

The 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 ultimate return of principal due on or before the Stated Maturity (as defined in the Credit Agreement).

CREDIT RATING RATIONALE/DESCRIPTION
The above rating action on the Loans is a result of the elevation to assignment of the closing date participations interests in the Collateral Loans.

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

The Reinvestment Period is scheduled to end on January 30, 2027. The Final Maturity Date is June 28, 2033.

The credit ratings reflect the following primary considerations:

The Credit Agreement, dated as of June 28, 2024.

The integrity of the transaction structure.

Morningstar DBRS' assessment of the portfolio quality.
Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

Morningstar DBRS' assessment of Blue Torch Capital's origination, servicing, and CLO management capabilities.

Some particular strengths of the transaction are (1) collateral that consists of primarily U.S. senior-secured middle-market corporate loans and (2) the adequate diversification of the portfolio of collateral obligations. Some challenges were identified: (1) 15% of the portfolio holdings may consist of First-Lien Last Out or Second-Lien Loans, and (2) the underlying collateral portfolio may be insufficient to redeem the Loans in an Event of Default.

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 ratings; rather, they represent a model-driven default probability for each obligor that Morningstar DBRS uses when rating the Loans.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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.

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 US Dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Global Methodology for Rating CLOs and Corporate CDOs (February 23, 2024; 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.
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 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)

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