Morningstar DBRS Confirms Credit Ratings on the Class A Loans of BlackRock Mt. Lassen Senior Loan Funding XII, LLC, Series 1

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 Class A Loans) issued by BlackRock Mt. Lassen Senior Loan Funding XII, LLC, Series 1 pursuant to the Amended and Restated Credit Agreement, dated November 8, 2024 (the Credit Agreement), as amended by the First Amendment to the Credit Agreement, dated February 19, 2025 (the Amendment), among BlackRock Mt. Lassen Senior Loan Funding XII, LLC, Series 1, as Borrower; BlackRock Mt. Lassen Senior Loan Funding XII, LLC, as Subordinated Lender; The Bank of Nova Scotia, as Administrative Agent; Wilmington Trust, National Association, as Collateral Agent, Collateral Administrator, Information Agent, Securities Intermediary, and Collateral Custodian; and the Lenders party thereto:

-- The Class A-R Loans rated AA (sf)
-- The Class A-T Loans rated AA (sf)

The credit ratings on the Class A Loans address the timely payments of interest (excluding any Capped Amounts and the additional interest payable at the Post-Default Rate, as defined in the Credit Agreement) and the ultimate payment of principal on or before the Scheduled Stated Maturity (as defined in the Credit Agreement).

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of: (1) Morningstar DBRS' review of the Amendment, which extended the Reinvestment Period and the Scheduled Stated Maturity by 1 year, extended the Maximum Weighted Average Life Test, and reduced the Applicable Margin and Interest Rate Cap on the Class A 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).

BlackRock Mt. Lassen Senior Loan Funding XII, LLC, Series 1 (the Borrower) is a registered series of BlackRock Mt. Lassen Senior Loan Fund XII, LLC, a series limited liability company organized under the law of the State of Delaware. The Borrower is a cash flow collateralized loan obligation (CLO) transaction that is collateralized primarily by a portfolio of U.S. senior secured middle-market corporate loans. The Reinvestment Period scheduled end date is December 28, 2026. The Scheduled Stated Maturity is December 28, 2033.

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 Class A 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 Loans, 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 BlackRock Capital Investment Advisors, LLC, as the Collateral Manager.

(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 Minimum Diversity Score Level, the following metrics are selected accordingly from the applicable row of the CQM: Minimum Weighted DBRS Average Recovery Rate Level, Maximum Weighted Average Risk Score Level, Maximum Class A Advance Rate, Minimum Senior Overcollateralization Ratio Level, Minimum Senior Interest Coverage Ratio Level, Maximum Class B Advance Rate, Minimum Junior Overcollateralization Ratio Level, Minimum Junior Interest Coverage Ratio Level, etc. 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 in the tables below:

(1) Minimum Senior Overcollateralization Ratio Level: Subject to CQM; required 138.46%; currently 158.69%
(2) Minimum Senior Interest Coverage Ratio Level: Subject to CQM; required 130.00%; currently 145.89%
(3) Minimum Junior Overcollateralization Ratio Level: Subject to CQM; required 120.00%; currently 154.75%
(4) Minimum Junior Interest Coverage Ratio Level: Subject to CQM; required 115.00%; currently 145.89%
(5) Minimum Diversity Score Level: Subject to CQM; required 16; currently 27.37
(6) Minimum Weighted DBRS Average Recovery Rate Level: Subject to CQM; required 51.7%; currently 53.4%
(7) Maximum Weighted Average Risk Score Level: Subject to CQM; required 38.43%; currently 29.32%
(8) Minimum Weighted Average Spread: required 5.00%; currently 8.38%
(9) Minimum Weighted Average Coupon: required 7.00%; currently N/A
(10) Maximum Class A Advance Rate: Subject to CQM; required 65.00%; currently 63.02%
(11) Maximum Class B Advance Rate: Subject to CQM; required 75.00%; currently 64.62%

As of the December 16, 2024 trustee report date, the Borrower is in compliance with all applicable Coverage Tests and Collateral Quality Tests. The transaction is currently failing its Concentration Limitation for Revolving Collateral Obligations and Delayed Drawdown Collateral Obligations (actual 12.93% vs required 12.50%). Morningstar DBRS considered this failure in its analysis.

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 Collateral Manager's expertise in CLOs and overall approach to selection of Collateral Loans.

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 Class A Loans in an Event of Default.

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" (November 19, 2024; https://dbrs.morningstar.com/research/443207) and the CLO Insight Model v.1.0.1.4.

Model-based analysis, which incorporated the above-mentioned collateral quality matrix, produced satisfactory results. Considering the analysis, as well as Morningstar DBRS' review of the Amendment, the credit ratings on the Class A Loans were confirmed.

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 Class A 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 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.

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.