Morningstar DBRS Confirms Credit Ratings on the Notes of BlackRock DLF X CLO 2022-1, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its following credit ratings on the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, and the Class D Notes (together, the Secured Notes) issued by BlackRock DLF X CLO 2022-1, LLC, and also confirmed its credit rating on the Issuer's Class W Notes (together with the Secured Notes, the Notes), pursuant to the Note Purchase and Security Agreement (the NPSA) dated as of August 5, 2022, among BlackRock DLF X CLO 2022-1, LLC, as the Issuer; Wilmington Trust National Association (rated A stb by Morningstar DBRS), as the Collateral Agent, Custodian, Collateral Administrator, Information Agent, and Note Agent; and the Purchasers.

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

The ratings on the Class A-1 Notes and the Class 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 repayment of principal on or before the Stated Maturity of August 5, 2034.

The ratings on the Class B, Class C, Class D, and Class W Notes address the ultimate payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate repayment of principal on or before the Stated Maturity. 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 August 5, 2026. The Stated Maturity is August 5, 2034.
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 15, 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 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 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.
(4) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of BlackRock Capital Investment Advisors, LLC.
(5) The legal structure as well as legal opinions addressing certain matters of the Issuer 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 196.52%; Required 134.18%
Class B OC: Actual 155.53%; Required 119.11%
Class C OC: Actual 142.59%; Required 117.63%
Class D OC: Actual 128.23%; Required 112.76%

Class A Interest Coverage (IC): Actual 501.87%; Required 150.00%
Class B IC: Actual 363.39%; Required 140.00%
Class C IC: Actual 318.72%; Required 120.00%
Class D IC: Actual 268.07%; Required 110.00%
Class W IC: Actual 254.48%; Required 100.00%

Collateral Quality Tests:
Minimum Weighted Average Spread: Actual 5.85%; Threshold 5.25%
Maximum Morningstar DBRS Risk Score: Actual 32.33; Threshold 32.75
Minimum Weighted Average Recovery Rate: Actual 50.70%; Threshold 49.00%
Minimum Diversity Score: Actual 30.91; Threshold 20

The transaction is performing according to the contractual requirements of the NPSA. 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 Notes issued by BlackRock DLF X 2022-1 CLO, LLC.

Some particular strengths of the transaction are (1) the collateral quality, which consists mostly of senior-secured floating-rate Middle Market loans and (2) the adequate diversification of the portfolio of collateral obligations. Some challenges were identified as follows: (1) the weighted average credit quality of the underlying obligors may fall below investment grade and may not have public ratings and (2) the underlying collateral portfolio may be insufficient to redeem the Notes 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 Notes.

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.