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. 13 to the Credit Agreement (the Credit Agreement), dated as of February 18, 2025, 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 (rated AA with a Stable trend by Morningstar DBRS) as the Custodian, U.S. Bank Trust Company National Association (rated AA with a Stable trend by Morningstar DBRS) as the Collateral Agent, and each of the Lenders from time to time thereto.

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) and the ultimate payment of principal on or before the Final Maturity Date (as defined in the amended Credit Agreement).

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of: (1) Morningstar DBRS' review of Amendment No. 13 to the Credit Agreement (the Amendment), which reduced the Interest Rate Cap and the Applicable Margin, 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 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. The Reinvestment Period scheduled end date is November 20, 2026. The Final Maturity Date is November 20, 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 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).

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 February 3, 2025, the Borrower is in compliance with all performance metrics. The current transaction performance is within Morningstar DBRS' expectations, as presented below.

(1) Minimum OC Ratio: Subject to CQM; required 127.63%; actual 155.59%
(2) Minimum IC Ratio: required 125.00%; actual 197.05%
(3) Maximum Advance Rate Test: required 65.00%; actual 64.27%
(4) Minimum Diversity Score Test: Subject to CQM; required 20; actual 39
(5) Maximum DBRS Morningstar Risk Score Test: Subject to CQM; required 31.79; actual 27.41
(6) Minimum Weighted-Average DBRS Morningstar Recovery Rate Test: Subject to CQM; required 52.60%; actual 54.00%
(7) Minimum Weighted-Average Spread (WAS) Test: Subject to CQM; required 6.25%; actual 6.47%
(8) Minimum Weighted-Average Fixed Rate Coupon Test: required 8.00%; actual N/A

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 February 3, 2025 Trustee Report, there were 15 defaults totaling $44.14 million registered in the portfolio. The current credit quality of the portfolio is reflected in the Morningstar DBRS Risk Score of 27.41.

The transaction's performance, in addition to Morningstar DBRS' review of the Amendment, supported the confirmation of the credit ratings on the Loans. Refinancings without any material amendments to the structure are analyzed under this surveillance approach. Decreases in the CLO tranche spreads, while material, are a credit positive, and as such, the transaction was analyzed under the surveillance approach. Given that the transaction is passing its performance metrics and still in its Reinvestment Period, the Level I surveillance analysis described in the CLO Methodology was applied, and no predictive model was utilized.

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, 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 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 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 provide 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 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.
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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.