Morningstar DBRS Assigns Provisional Credit Ratings to the Loans Issued by Reservoir Financial, LLC

DBRS, Inc. (Morningstar DBRS) assigned the following provisional credit ratings to the Class A Loan, the Class B Loan, the Class C Loan, and the Class D Loan, and the Class E Loan (together, the Loans) issued by Reservoir Financial, LLC, pursuant to the terms of the Fourth Amended and Restated Loan Agreement (the Loan Agreement) dated December 20, 2024, among Reservoir Financial, LLC, as the Borrower; Delaware Life Insurance Company, as a Lender and the Managing Lender; Clear Spring Life and Annuity Company, as a Lender; and Cortland Capital Market Services LLC, as the Paying Agent and Calculation Agent:

-- Class A Loan at (P) AA (low) (sf)
-- Class B Loan at (P) A (low) (sf)
-- Class C Loan at (P) BBB (sf)
-- Class D Loan at (P) BB (sf)
-- Class E Loan at (P) B (low) (sf)

The provisional credit rating on the Class A Loan addresses the timely payment of interest and the ultimate payment of principal on or before the Legal Final Maturity Date. The provisional credit ratings on the Class B Loan, the Class C Loan, and the Class D Loan, and the Class E Loan address the ultimate payment of interest and the ultimate payment of principal on or before the Legal Final Maturity Date. The Loans could have an earlier Maturity Date (as defined in the Loan Agreement) if the proceeds from the liquidation of the assets of the Borrower, distributed pursuant to Section 1.4 of the Loan Agreement, would be sufficient so that after such distribution all interest and Deferred Interest (if any) due and payable and the outstanding principal amount of the Loans would be paid in full and the Aggregate Loan Balance reduced to zero.

Should a Distribution Event (as defined in the Loan Agreement) occur, the Designated Lender (as defined in the Loan Agreement) shall have the right at any time, upon written notice to the Borrower, the Paying Agent, and the Rating Agency, to instruct the Paying Agent to distribute the Borrower's assets to the Designated Lenders. In consideration thereof, the Aggregate Loan Balance of the Loans will be reduced to zero and all obligations of the Borrower (except those which expressly survive the termination of the Loan Agreement) shall be deemed satisfied.

CREDIT RATING RATIONALE/DESCRIPTION
Reservoir Financial, LLC is a cash flow collateralized loan obligation (CLO) that will be collateralized primarily by a portfolio of U.S. senior secured middle-market (MM) corporate loans and managed by Delaware Life Insurance Company as the Servicer. Morningstar DBRS considers Delaware Life Insurance Company to be an acceptable CLO manager. At the time of assigning the provisional credit ratings on the Loans, Morningstar DBRS understood that the Lenders and the Servicer are affiliated entities (though the Lenders may sell or assign the Loans following the closing). As such, as of this date, certain key parties to this transaction are related parties. In addition, Delaware Life Insurance Company engaged Morningstar DBRS for the determination of the credit ratings on the Loans.

The Scheduled Reinvestment Period Termination Date is the Payment Date immediately succeeding the date that is three years following the DBRS Final Ratings Effective Date, as defined in the Loan Agreement. The Legal Final Maturity Date is December 18, 2034.

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.
(5) Assessment of the CLO management capabilities of Delaware Life Insurance Company as the Servicer.
(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 a selection of an applicable row from a collateral quality matrix (the CQM). Depending on a given Applicable Row Level, selected by the Servicer, the following metrics are determined by the applicable row of the CQM: Maximum Weighted Average Life, Minimum Weighted Average Spread, and Maximum Risk Score. Morningstar DBRS analyzed each structural configuration as a unique transaction and all configurations (rows) passed the applicable Morningstar DBRS rating stress levels. The Overcollateralization Tests and the Collateral Quality Tests that Morningstar DBRS modelled during its analysis are presented below:

Coverage Tests
Class A Overcollateralization Test: 137.06%
Class B Overcollateralization Test: 125.33%
Class C Overcollateralization Test: 119.00%
Class D Overcollateralization Test: 110.28%
Class E Overcollateralization Test: 106.73%

Collateral Quality Tests
Minimum Weighted-Average Spread: Subject to Collateral Quality Matrix; 5.25% - 6.25%
Minimum Weighted-Average Coupon: 5.50%
Minimum Weighted-Average Recovery Rate: 52.5%
Maximum Weighted-Average Risk Score: Subject to Collateral Quality Matrix; 30.0% - 35.0%
Maximum Weighted-Average: Subject to Collateral Quality Matrix: 3.00 - 5.50 years

Some particular strengths of the transaction are (1) collateral that consists of primarily U.S. senior-secured MM corporate loans, and (2) the expected adequate diversification of the portfolio of collateral obligations (Diversity Score, CQM-driven).

Some challenges were identified: (1) the collateral will be revolving during the Reinvestment Period and will continue to ramp up after the Closing Date, and (2) the expected weighted-average credit quality of the underlying obligors may fall below investment grade (per the CQM) and the majority of the underlying loans are not expected to have public ratings.

Morningstar DBRS modeled 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, default timings, and recovery rates, among other credit considerations referenced in the Morningstar DBRS "Global Methodology for Rating CLOs and Corporate CDOs." Morningstar DBRS' analysis produced satisfactory results, which supported the provisional credit ratings on the 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 Morningstar DBRS uses when rating the Loans.

Morningstar DBRS' provisional credit ratings on the Loans address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the interest (including any Deferred Interest) and the principal amounts due on the Loans.

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 U.S. dollars unless otherwise noted.

The principal methodology applicable to the credit ratings is Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024) https://dbrs.morningstar.com/research/443207 and CLO Insight Model v1.0.1.4.

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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned Loans and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned Loans are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

DBRS, Inc.
140 Broadway, 43rd Floor
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: https://dbrs.morningstar.com/about/methodologies.

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

Operational Risk Assessment for Collateralized Loan Obligations (CLOs) and Corporate Collateralized Debt Obligations (CDOs) (August 23, 2024)
https://dbrs.morningstar.com/research/438315

Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064

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