Morningstar DBRS Confirms Credit Ratings on the Notes of BlackRock DLF IX CLO 2021-2, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes (together, the Secured Notes), and the Class W Notes (together with the Secured Notes, the Notes) issued by BlackRock DLF IX CLO 2021-2, LLC (BlackRock IX CLO or the Issuer), as follows:

-- Class A-1 Notes at AAA (sf)
-- Class A-2 Notes at AA (high) (sf)
-- Class B Notes at A (high) (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)
-- Class W Notes at B (sf)

The Notes were issued pursuant to the Note Purchase and Security Agreement (NPSA) dated May 20, 2021, as amended on August 2, 2022, among the Issuer and U.S. Bank National Association (rated AA stb / R-1 (high) stb by Morningstar DBRS) as the Collateral Agent, Custodian, Document Custodian, Collateral Administrator, Information Agent, and Note Agent; and the Purchasers referred to therein. The Notes are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer is managed by BlackRock Capital Investment Advisors, LLC (BCIA), which is a wholly owned subsidiary of BlackRock, Inc. Morningstar DBRS considers BCIA an acceptable collateralized loan obligation (CLO) manager.

The ratings on the Class A-1 and A-2 Notes address the timely payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of May 20, 2035.

The ratings on the Class B Notes, Class C Notes, Class D Notes, Class E Notes, and Class W Notes address the ultimate payment of interest (including any Deferred Interest, but excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of May 20, 2035. The Class W Notes have a fixed-rate coupon that is lower than the spread/coupon of some of the more-senior Secured Notes. The Class W Notes also benefit from the Class W Note Payment Amount, which allows for principal repayment of the Class W Notes with collateral interest proceeds, in accordance with the Priority of Payments.

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.

CREDIT RATING RATIONALE/DESCRIPTION

The credit rating action is a result of Morningstar DBRS' review of the transaction performance. The Reinvestment Period end date is May 20, 2027. The Stated Maturity is May 20, 2035.
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 July 19, 2024, the transaction is in compliance with all performance metrics. The current transaction performance is within Morningstar DBRS's expectations, which supports the confirmations on the Notes.

In its review, Morningstar DBRS 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 Notes 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 BCIA.
(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.
Some of the performance metrics that Morningstar DBRS reviewed are listed below:
Coverage Tests

Class A Overcollateralization (OC): Actual 166.54%; Required 143.97%
Class B OC: Actual 152.12%; Required 135.27%
Class C OC: Actual 141.02%; Required 128.66%
Class D OC: Actual 128.80%; Required 119.22%
Class E OC: Actual 116.02%; Required 110.75%

Class A Interest Coverage (IC): Actual 289.72%; Required 150.00%
Class B IC: Actual 261.02%; Required 140.00%
Class C IC: Actual 236.94%; Required 130.00%
Class D IC: Actual 210.22%; Required 120.00%
Class E IC: Actual 182.74%; Required 110.00%
Class W IC: Actual 177.04%; Required 100.00%

Collateral Quality Tests
Minimum Weighted Average Spread: Current 5.83%; Threshold 5.50%
Minimum Weighted Average Coupon: Current 12.00%; Threshold 6.00%
Maximum Morningstar DBRS Risk Score: Current 36.21; Threshold 38.75
Minimum Weighted Average Recovery Rate: Current 49.3%; Threshold 46.8%
Minimum Diversity Score: Current 42; Threshold 23

The transaction is performing according to the parameters set in the NPSA. As of July 19, 2024, the Borrower is in compliance with all coverage and collateral quality tests and there were no defaulted obligations registered in the portfolio. The credit quality of the portfolio is reflected in the current Morningstar DBRS Risk Score of 36.21.

Some particular strengths of the transaction are (1) the collateral quality, which consists mostly of senior-secured middle market loans, (2) the adequate diversification of the portfolio of collateral obligations (DScore currently at 42 versus test level of 23), and (3) the Collateral Manager's expertise in CLOs and overall approach to the selection of Collateral Obligations.

Some challenges were identified in that (1) the expected weighted-average credit quality of the underlying obligors may fall below investment grade (per the Collateral Quality Matrix) and the majority may not have public ratings once purchased, and (2) the underlying collateral portfolio may be insufficient to redeem the Notes in an Event of Default.

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.

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 Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781).

Notes:
All figures are in U.S. 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.

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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.

Operational Risk Assessment for Collateralized Loan Obligations (CLOs) and Corporate Collateralized Debt Obligations (CDOs) (August 23, 2024; https://dbrs.morningstar.com/research/438315)

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.