Morningstar DBRS Finalizes Provisional Credit Ratings on the Advances of Cerberus 9990 Levered LLC

DBRS, Inc. (Morningstar DBRS) finalized its following provisional credit ratings on the Swingline Advances, the Revolving Advances, and the Term Advances (together, the Advances) issued by Cerberus 9990 Levered LLC, pursuant to the Credit Agreement, dated April 5, 2024 (the CA), among Cerberus 9990 Levered LLC, as the Borrower, Cerberus 9990 Levered Holdings LLC, as the Servicer, The Bank of Nova Scotia, as the Administrative Agent, U.S. Bank Trust Company, N.A., as the Collateral Agent and Custodian, and the Lenders party thereto:

-- Swingline Advances at AA (sf)
-- Revolving Advances at AA (sf)
-- Term Advances at AA (sf)

The credit ratings on the Advances address the timely payments of interest (excluding any Excess Interest Amounts, Costs and Expenses, Breakage Costs, and/or Indemnified Amounts as defined in the CA) and the ultimate payments of principal on or before the Final Maturity Date (as defined in the CA).

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of Morningstar DBRS' review of the transaction performance by applying the "Global Methodology for Rating CLOs and Corporate CDOs" (the CLO Methodology; November 19, 2024; https://dbrs.morningstar.com/research/443207) in addition to the satisfaction of certain conditions to finalize the credit ratings, including a Diversity Score of at least 8.

Cerberus 9990 Levered LLC is a cash flow collateralized loan obligation (CLO) transaction that is collateralized primarily by a portfolio of U.S. senior secured middle-market (MM) corporate loans. The Reinvestment Period is scheduled to end on July 5, 2026. The Final Maturity Date is April 5, 2033.

In its analysis, Morningstar DBRS also 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 Advances 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) Assessment of the CLO management capabilities of Cerberus 9990 Levered Holdings LLC, an affiliate of Cerberus Capital Management II, L.P., 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 Legal Criteria).

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 November 1, 2024, the transaction is in compliance with all performance metrics. The current transaction performance is within Morningstar DBRS' expectations, which supported the finalization of the credit ratings on the Advances, as per the Level I surveillance analysis in the CLO Methodology. No predictive model is utilized in the Level I surveillance process.

The coverage and collateral quality test reported values and thresholds, respectively, that Morningstar DBRS reviewed are as follows:

(1) Overcollateralization Test: Subject to CQM; actual 176.31%; threshold 150.00%
(2) Interest Coverage Test: actual 240.98%; threshold 130.00%
(3) Minimum Weighted-Average Spread Test: Subject to CQM; actual 6.54%; threshold 5.00%
(4) Minimum Diversity Score Test: Subject to CQM; actual 25.25; threshold 25.00%
(5) Minimum Weighted-Average DBRS Recovery Rate Test: Subject to CQM; actual 53.71%; threshold 46.09%
(6) Maximum DBRS Risk Score Test: Subject to CQM; actual 23.54; threshold 36.62

As of November 1, 2024, there were no defaulted obligations registered in the portfolio.

Some particular 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 Servicer'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 Advances 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 Advances.

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 the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024) https://dbrs.morningstar.com/research/443207.

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.
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.