Morningstar DBRS Confirms Credit Ratings on the Notes Issued by TCP DLF VIII 2018 CLO, 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, and Class E Notes (together, the Notes) issued by TCP DLF VIII 2018 CLO, LLC (the Issuer) as follows:

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

The Notes were issued pursuant to the Note Purchase and Security Agreement dated as of February 28, 2018 (the NPSA), as amended by the First Amendment to the Note Purchase and Security Agreement, dated as of January 28, 2019 and further amended by the Second Amendment to the Note Purchase Agreement, dated as of October 24, 2019, among the Issuer; U.S. Bank National Association (rated AA stb / R-1 (high) stb by Morningstar DBRS) as Collateral Agent, Custodian, Collateral Administrator, Information Agent, and Note Agent.

The credit ratings on the Class A-1 Notes and Class A-2 Notes address the timely payment of interest (excluding the additional 1% of interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate repayment of principal on or before the Stated Maturity (as defined in the NPSA). The credit ratings on the Class B Notes, Class C Notes, Class D Notes, and Class E Notes address the ultimate payment of interest (excluding the additional 1% of interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity (as defined in the NPSA).

The Notes issued by the Issuer are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer is managed by Series I of SVOF/MM, LLC (the Collateral Manager), a consolidated subsidiary of Tennenbaum Capital Partners, LLC, which is itself a wholly owned subsidiary of BlackRock, Inc. Morningstar DBRS considers Series I of SVOF/MM, LLC to be an acceptable collateralized loan obligation (CLO) manager.

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' annual review of the transaction performance. The Reinvestment Period ended on February 28, 2022. The Stated Maturity is February 28, 2030. Given the static pool, Morningstar DBRS analyzed the actual obligations in the pool as opposed to a hypothetical pool, which is governed by the covenanted test limitations.

In its analysis, 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.
(5) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of Series I of SVOF/MM, LLC.
(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.

The Notes are collateralized primarily by a portfolio of U.S. middle-market corporate loans. This portfolio is static in nature and does not allow for reinvestment. To account for a static pool, Morningstar DBRS analyzed the actual obligations in the pool as reported in the trustee report on August 20, 2024, accounting for a failing minimum Weighted Average Coupon test (3.50% vs required 8.00%), maximum Weighted Average Life Test (2.58 vs required 2.00), minimum Weighted Average DBRS Recovery Rate Test (46.8% vs required 47.0%). There were three defaulted obligations totaling US $9.11 million. Morningstar DBRS analyzed each loan in the pool separately by inputting its tenor, Morningstar DBRS rating, country of origin, and industry into the CLO Insight Model. The model-based analysis, along with the cash flow engine output, produced satisfactory results, which supported the credit rating confirmations.

Some of the performance metrics that Morningstar DBRS reviewed are listed below:

Coverage Tests
Class A-2 Overcollateralization (OC): Actual 288.71%, Required 143.97%
Class B OC: Actual 217.14%, Required 134.18%
Class C OC: Actual 179.97%, Required 127.71%
Class D OC: Actual 151.45%, Required 120.03%
Class E OC: Actual 141.27%, Required 117.55%

Class A-2 Interest Coverage (IC): Actual 281.38%, Required 150.00%
Class B IC: Actual 203.32%, Required 140.00%
Class C IC: Actual 163.87%, Required 130.00%
Class D IC: Actual 130.50%, Required 120.00%
Class E IC: Actual 118.4%, Required 110.00%

Collateral Quality Tests
Minimum Weighted-Average Spread: Actual 6.304%, Required 5.750%
Minimum Weighted-Average Coupon: Actual 3.50%, Required 8.00%
Maximum Morningstar DBRS Risk Score: Actual 40.03, Required 40.75
Minimum Weighted-Average Recovery Rate: Actual 46.90%, Required 47.0%
Minimum Diversity Score: Actual 31, Required 30
Maximum Senior Advance Rate: Actual 34. 64%, Required 81.00%

Morningstar DBRS analyzed the transaction using the Morningstar DBRS CLO Insight Model and its proprietary cash flow engine, which incorporated assumptions regarding principal amortization, amount of interest generated, principal pre-payments, default timings, and recovery rates, among other credit considerations referenced in the Morningstar DBRS "Global Methodology for Rating CLOs and Corporate CDOs" (February 23, 2024; https://dbrs.morningstar.com/research/428544). Model-based analysis produced satisfactory results, which supported the respective confirmations of the credit ratings on the Notes.

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 (the current DScore of 31 compared with test level of 30). 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 is used in assigning ratings to a facility.

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) and the CLO Insight Model v1.0.1.2.

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 13, 2023, when Morningstar DBRS upgraded and confirmed its credit ratings on the 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: February 28, 2018

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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.