Morningstar DBRS Confirms Its Credit Ratings on the Class A-R and Class A-T Loans of ABPCIC Funding IV, LLC

DBRS, Inc. (Morningstar DBRS) confirmed the following credit ratings on the Class A-R Loans and the Class A-T Loans (together, the Class A Loans) issued by ABPCIC Funding IV, LLC (the Borrower), pursuant to the Credit Agreement dated as of April 21, 2023, as amended by Amendment No. 1 to the Credit Agreement dated June 2, 2023, and as amended by Amendment No. 2 to the Credit Agreement dated October 17, 2024 (the Amendment), among ABPCIC Funding IV, LLC, as Borrower; Natixis, New York Branch, as Administrative Agent; U.S. Bank Trust Company, National Association, as Collateral Agent and Collateral Administrator; and the Lenders referred to therein:

-- Class A-R Loans at AA (sf)
-- Class A-T Loans at AA (sf)

The credit ratings on the Class A Loans address the timely payment of interest up to the Interest Rate Cap (as defined in the Credit Agreement referred to above) and the ultimate payment of principal on or before the Stated Maturity (as defined in the Credit Agreement referred to above).

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.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of the Amendment dated October 17, 2024, which modified the definition of Reinvestment Period to 24 months after the Closing Date. The definitions of Applicable Margin and Interest Rate Cap were also updated to 2.25% (previously 3.00%), among other changes. The Reinvestment Period end date is April 21, 2025. The Sated Maturity date is April 21, 2033.

The Borrower is a bankruptcy-remote special-purpose vehicle established by AB Private Credit Investors LLC (ABPCI) as the Collateral Manager. The Class A Loans are collateralized primarily by a portfolio of U.S. middle-market corporate loans and other corporate obligations. ABPCIC Funding IV is managed by ABPCI, an affiliate of Alliance Bernstein L.P. Morningstar DBRS considers ABPCI an acceptable collateralized loan obligation (CLO) manager.

In its analysis, Morningstar DBRS considered the following aspects of the transaction:
(1) The Credit Agreement dated as of April 21, 2023, as amended by Amendment No. 1 to the Credit Agreement dated June 2, 2023, and as amended by Amendment No. 2 to the Credit Agreement dated October 17, 2024.
(2) The integrity of the transaction structure.
(3) Morningstar DBRS' assessment of the portfolio quality.
(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(5) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of ABPCI.
(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 transaction has a dynamic structural configuration that permits variations of certain asset metrics via the selection of an applicable row from a collateral quality matrix (the CQM). Depending on a given Diversity Score, the following metrics will be selected accordingly from the applicable row of the CQM: Morningstar DBRS Risk Score, Weighted-Average Spread (WAS), and Weighted-Average Recovery Rate (WARR). Morningstar DBRS analyzed each structural configuration as a unique transaction and all configurations (rows) passed the applicable Morningstar DBRS rating stress levels. The Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modeled during its analysis are presented below.

(1) Overcollateralization Ratio: Subject to Collateral Quality Matrix; 141.54%
(2) Interest Coverage Ratio: 150.00%
(3) Minimum Diversity Score Test: Subject to Collateral Quality Matrix; 15
(4) Maximum Morningstar DBRS Risk Score Test: Subject to Collateral Quality Matrix; 38.00%
(5) Minimum WA Morningstar DBRS Recovery Rate Test: 48.16%
(6) Minimum WA Coupon Test: 7.50%
(7) Minimum WAS Test: Subject to CQM; 4.75%

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 (Diversity Score of 35 vs the threshold of 27); and (3) the Collateral Manager's expertise in CLOs and overall approach to selection of Collateral Obligations.

Some challenges were identified: (1) the expected WA credit quality of the underlying obligors may fall below investment grade, and the majority may not have public ratings, and (2) the underlying collateral portfolio may be insufficient to redeem the Class A Loans in an Event of Default.

As of September 13, 2024, the transaction is in compliance with all its Coverage Tests, Concentration Limitations, and Collateral Quality Tests. There were no defaulted obligations reported to date.

Morningstar DBRS analyzed the transaction using the Morningstar DBRS CLO Insight Model and its proprietary cash flow engine, which incorporated assumptions regarding principal amortization, principal prepayment, amount of interest generated, principal prepayments, default timings, and recovery rates, among other credit considerations referenced in Morningstar DBRS' "Global Methodology for Rating CLOs and Corporate CDOs" (September 19, 2024) https://dbrs.morningstar.com/research/439759).

Model-based analysis, which had incorporated the above-mentioned amendments, produced satisfactory results. Considering the analysis, as well as the transaction's legal aspects and structure, Morningstar DBRS confirmed the credit ratings on the Class A Loans.

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.

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 (September 19, 2024) https://dbrs.morningstar.com/research/439759 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.

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.

Legal Criteria for U.S. Structured Finance (April 15, 2024)
https://dbrs.morningstar.com/research/431205

Interest Rate Stresses for U. S. Structured Finance Transactions (February 26, 2024)
https://dbrs.morningstar.com/research/428623

Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) (August 23, 2024)
https://dbrs.morningstar.com/research/438315

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