Morningstar DBRS Confirms its AA (sf) Credit Ratings on the Class A-R Loans and A-T Loans of Cerberus PSERS Levered LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings of AA (sf) on the Class A-R Loans and the Class A-T Loans, (together, the Loans), issued by Cerberus PSERS Levered LLC, pursuant to the Credit Agreement, as most-recently amended by Amendment No. 12 to the Credit Agreement (the Credit Agreement), dated as of November 20, 2024, among Cerberus PSERS Levered LLC as the Borrower, Cerberus PSERS Levered Loan Opportunities Fund, L.P. as the Servicer, Natixis, New York Branch as the Administrative Agent, U.S. Bank National Association as the Custodian, U.S. Bank Trust Company National Association as the Collateral Agent, and each of the Lenders from time to time thereto.

The credit rating actions do not signify Morningstar DBRS' approval of the amendment or its opinion as to whether the amendment is beneficial or detrimental to the holders of the Loans.

The credit ratings on the Loans address the timely payment of interest (excluding any Excess Interest Amounts and any additional
interest payable pursuant to Section 2.5(c)(ii), as defined in the amended Credit Agreement referred to above) and the
ultimate payment of principal on or before the Final Maturity Date (as defined in the amended Credit Agreement referred
to above).

The Loans are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The servicer for Cerberus PSERS Levered LLC is Cerberus PSERS Levered Loan Opportunities Fund, L.P., an affiliate of Cerberus Capital Management II, L.P. Morningstar DBRS considers Cerberus PSERS Levered Loan Opportunities Fund, L.P.to be an acceptable collateralized loan obligation (CLO) servicer.

CREDIT RATING RATIONALE/DESCRIPTION

The credit rating confirmation with respect to the Loans, are being provided in relation to the execution of Amendment No. 12 to the Credit Agreement, which amends the Collateral Quality Matrix, extends by 2 years the Reinvestment Period end date to November 20, 2026 and the Final Maturity Date to November 20, 2033, among other changes.

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 Loans 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 Cerberus PSERS Levered Loan Opportunities Fund, L.P., an affiliate of Cerberus Capital Management II, L.P.
(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 Legal Criteria).

The transaction has a dynamic structural configuration which permits variations of certain asset metrics via a selection of an applicable row from a collateral quality matrix (the CQM, as defined in Schedule I of the Credit Agreement). Depending on a given Diversity Score (DScore), the following metrics are selected accordingly from the applicable row of the CQM: Morningstar DBRS Risk Score, Advance Rate, Overcollateralization (OC) Levels, and Weighted Average Spread Level. 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 modelled during its analysis are presented below.

(1) Minimum OC Ratio: Subject to CQM; 127.63%
(2) Minimum IC Ratio: 125.00%
(3) Maximum Weighted-Average Life Test: 6
(4) Minimum Diversity Score Test: Subject to CQM; 10
(5) Maximum DBRS Morningstar Risk Score Test: Subject to CQM; 51.53%
(6) Minimum Weighted-Average DBRS Morningstar Recovery Rate Test: Subject to CQM; 30.55%
(7) Minimum Weighted-Average Spread (WAS) Test: Subject to CQM; 6.00%
(8) Minimum Weighted-Average Fixed Rate Coupon Test: 8.00%

The transaction is performing according to the parameters of the Credit Agreement. The Borrower is in compliance with all coverage and collateral quality tests as well as concentration limitations for portfolio collateral obligations. As of the 10/1/2024 Trustee Report, there were 8 obligor defaults totaling $36.46mm in the portfolio. The current credit quality of the portfolio is reflected in the Morningstar DBRS Risk Score of 28.82.

Some strengths of the transaction are (1) the collateral quality, which will consist mostly of senior-secured middle market loans; (2) the expected adequate diversification of the portfolio of collateral obligations (Diversity Score, matrix driven); and (3) the Collateral Manager's expertise in CLOs and overall approach to selection of Collateral Obligations.

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

Morningstar DBRS modeled the proposed amendment in the transaction using the Morningstar DBRS CLO Insight model v.1.0.1.4 and its proprietary cash flow engine, which incorporated assumptions regarding principal amortization, amount of interest generated, default timings, and recovery rates. Model based analysis produced satisfactory results which supported the confirmation of the ratings on the Loans.

Considering the transaction performance, its legal aspects, and the results produced by the models, Morningstar DBRS confirmed a credit rating of AA (sf) to the Loans issued by Cerberus PSERS Levered LLC.

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 Loans.

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.

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 US 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

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.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at:

Legal Criteria for U.S. Structured Finance (October 28, 2024) https://dbrs.morningstar.com/research/441840

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 [email protected].