Morningstar DBRS Confirms AA (sf) Ratings on the Loans and Discontinues Rating on the Class A-R-2 Loans and the Class A-T-1 Loans of Cerberus Redwood Levered B LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings of AA (sf) on the Class A-R Loans (formerly known as the Class A-R-1 Loans) and the Class A-T Loans (formerly known as the Class A-T-2 Loans) (together, the Loans) issued by Cerberus Redwood Levered B LLC. At the same time, Morningstar DBRS discontinues its credit ratings on the Class A-R-2 Loans and on the Class A-T-1 Loans issued by Cerberus Redwood Levered B LLC. The Loans are issued pursuant to the Credit Agreement, as most recently amended by Amendment No. 9 to Credit Agreement, dated as of February 4, 2025, among Cerberus Redwood Levered B LLC (the Borrower), Cerberus Redwood Levered Loan Opportunities Fund B, L.P. (the Servicer and Retention Provider), Natixis, New York Branch (the Administrative Agent), U.S. Bank Trust Company, National Association (the Collateral Agent), U.S. Bank National Association (the Custodian; rated AA with a Stable trend by Morningstar DBRS) and the Lenders thereto.

The credit ratings on the Loans address the timely payments 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) and the ultimate payments of principal on or before the Final Maturity Date (as defined in the amended Credit Agreement).

The discontinuation of the credit ratings on the Class A-R-2 Loans and on the Class A-T-1 Loans reflects the conversion of the Class A-R-2 Loans into the Class A-R Loans and the Class A-T-1 into the Class A-T Loans, respectively.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of: (1) Morningstar DBRS' review of Amendment No. 9 to Credit Agreement, dated as of February 4, 2025 (the Amendment), which amended the Collateral Quality Matrix (CQM), reduced the transaction's Applicable Margin and Interest Rate Cap, extended the Maximum Weighted-Average Life Test, the Reinvestment Period, and the Final Maturity Date, combined the Class A-R-1 Loans and the Class A-R-2 Loans into a single Class A-R Loans, and combined the Class A-T-1 Loans and the Class A-T-2 Loans into a single Class A-T Loans, among other changes; and (2) 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). The transaction's Reinvestment Period ends on February 4, 2027. The Final Maturity Date is February 4, 2034.

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 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) Assessment of the CLO management capabilities of Cerberus Redwood Levered Loan Opportunities Fund B, L.P., 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 Morningstar DBRS' "Legal Criteria for U.S. Structured Finance" methodology.

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 (CQM). Depending on a given Diversity Score, the following metrics are selected accordingly from the applicable row of the CQM: Morningstar DBRS Weighted Average Risk Score, Advance Rate, Weighted Average Spread, Weighted Average Recovery Rate, and Overcollateralization Test. Morningstar DBRS analyzed each structural configuration (as defined in Schedule I of the Credit Agreement) as a unique transaction and all configurations (rows) passed the applicable Morningstar DBRS credit rating stress levels. The Coverage Tests and the Collateral Quality Tests that Morningstar DBRS modeled during its analysis are presented in the tables below:

(1) Overcollateralization Ratio Test: Subject to Collateral Quality Matrix (CQM); Minimum 127.63%; Maximum 222.73%
(2) Interest Coverage Ratio Test: 125.00%
(3) Advance Rate Test: Subject to CQM; Minimum 40.0%; Maximum 65.0%
(4) Minimum Weighted-Average (WA) Spread Test: Subject to CQM; Minimum 5.50%; Maximum 7.00%
(5) Maximum WA Life Test: 6.00 years
(6) Minimum Diversity Score Test: Subject to CQM; Minimum 10; Maximum 27
(7) Minimum WA Morningstar DBRS Recovery Rate Test: Subject to CQM; Minimum 28.35%; Maximum 54.95%
(8) Maximum Morningstar DBRS Risk Score Test: Subject to CQM Minimum 31.00%; Maximum 51.00%

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. There were approximately $52.94 million in defaulted obligations registered in the underlying portfolio as of the December 2, 2024 trustee report date.

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 Loans 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' 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 transaction's 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 and the 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.

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.

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.