Morningstar DBRS Confirms Credit Ratings on the Secured Notes of BlackRock DLF IX CLO 2021-1, 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, and Class W Notes (together, the Secured Notes) issued by BlackRock DLF IX CLO 2021-1, LLC (the Issuer), as follows:

-- Class A-1 Notes at AAA (sf)
-- Class A-2 Notes at AAA (sf)
-- Class B Notes at AA (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 Secured Notes were issued pursuant to the Note Purchase and Security Agreement (NPSA) dated March 30, 2021, and amended on August 10, 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 Secured 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 credit ratings on the Class A-1 Notes and 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 payment of principal on or before the Stated Maturity of March 30, 2031.

The credit 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 March 30, 2031. 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 March 30, 2025. The Stated Maturity is March 30, 2031.

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 Secured 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 Secured 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-2 Overcollateralization (OC): Actual 166.68%; Required 143.97%
Class B OC: Actual 150.85%; Required 134.18%
Class C OC: Actual 136.78%; Required 124.95%
Class D OC: Actual 125.11%; Required 115.33%
Class E OC: Actual 112.93%; Required 107.54%

Class A-2 Interest Coverage (IC): Actual 291.99%; Required 150.00%
Class B IC: Actual 260.54%; Required 140.00%
Class C IC: Actual 230.15%; Required 130.00%
Class D IC: Actual 204.87%; Required 120.00%
Class E IC: Actual 178.69%; Required 110.00%
Class W IC: Actual 174.38%; Required 100.00%

Collateral Quality Tests
Minimum WAS: Actual 6.08%; Required 5.75%
Minimum Weighted-Average Coupon: Actual 8.66%; Required 6.00%
Maximum Morningstar DBRS Risk Score: Actual 37.38; Required 38.00
Minimum Weighted-Average Recovery Rate: Actual 48.80%; Required 47.50%
Minimum DScore: Actual 41; Required 30

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. There is one defaulted obligation (a total par amount of $9,878,722.28) registered in the portfolio. The current credit quality of the portfolio is reflected in the current Morningstar DBRS Risk Score of 37.38.

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 41 versus test level of 30), 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 per the Collateral Quality Matrix) and the majority may not have public credit ratings once purchased, and (2) the underlying collateral portfolio may be insufficient to redeem the Secured 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 Secured 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.

Please, see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

The last credit rating action on this issuer took place on November 9, 2023, when Morningstar DBRS confirmed the credit ratings on the Secured Notes.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Oxana Rhybak, Vice President, Sector Lead, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: March 30, 2021

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.

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.