Morningstar DBRS Confirms Credit Rating on the Class A-1 Notes and Discontinues Credit Rating on the Class A Loans Issued by Cerberus Loan Funding XXIV L.P.

DBRS, Inc. (Morningstar DBRS) confirmed its credit rating of AAA (sf) on the Class A-1 Senior Secured Floating-Rate Notes (the Class A-1 Notes or the Notes) issued by Cerberus Loan Funding XXIV L.P. (Cerberus or the Issuer) pursuant to the Indenture dated August 7, 2018 (the Indenture), among Cerberus, as Issuer; Cerberus LFGP XXIV, LLC, as General Partner; Cerberus Co-Issuer XXIV LLC, as Co-Issuer; Cerberus Business Finance, LLC (CBF), as Servicer; and Wells Fargo Bank, N.A. (rated AA with a Stable trend by Morningstar DBRS), as Trustee. Morningstar DBRS also discontinued its credit rating on the Class A Senior Secured Loans (the Class A Loans or the Loans) issued by Cerberus as the Borrower, pursuant to the Class A Loan Agreement (the Loan Agreement), dated August 7, 2018, among the Borrower, Cerberus Co-Issuer XXIV LLC as the Co-Borrower, the General Partner, the Trustee, and each of the Class A Lenders hereto.

Pursuant to the Indenture and the Loan Agreement, 100% of the Class A Loans were converted into an equivalent beneficial ownership of Class A-1 Notes.

The credit rating on the Notes addresses the timely payments of interest and the ultimate payments of principal on or before the Stated Maturity (as defined in the Indenture referred to above).

The Notes are collateralized primarily by a portfolio of U.S. middle-market (MM) corporate loans. Cerberus is managed by CBF as Servicer. Morningstar DBRS considers CBF an acceptable collateralized loan obligation (CLO) manager.

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 private rating letters 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.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of Morningstar DBRS' annual surveillance review of the transaction performance. The Reinvestment Period ended on July 15, 2022. The Stated Maturity Date is July 15, 2030. In its surveillance review, Morningstar DBRS applied the Level III approach, as described in the Global Methodology for Rating CLOs and Corporate CDOs, and incorporated the Current Profile analysis, since the transaction is past its reinvestment period.

In its analysis, Morningstar DBRS considered the following aspects of the transaction:

(1) The Indenture, dated August 7, 2018.
(2) The integrity of the transaction structure.
(3) Morningstar DBRS' assessment of the portfolio quality.
(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(5) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of CBF.

Some particular strengths of the transaction are (1) the collateral quality, which consists primarily of senior-secured floating-rate MM loans and (2) the collateral manager's expertise in CLOs and overall approach to selection of collateral loans. Some challenges identified were (1) the weighted-average (WA) credit quality of the underlying obligors may fall below investment grade and (2) the underlying collateral portfolio may be insufficient to redeem the debt in an Event of Default.

To account for a static pool, Morningstar DBRS analyzed the actual obligations in the pool as reported in the trustee report on February 3, 2025, which took into account the Weighted Average Life (WAL) test breach (1.69 vs 1.50) and the DScore breach (22 vs 24). The Coverage Tests and Collateral Quality Tests that Morningstar DBRS modeled in its analysis are presented below.

Coverage Tests
Class A/B Overcollateralization (OC) Ratio: Threshold 154.40%; Current 216.46%
Class C OC Ratio: Threshold 133.00%; Current 152.82%
Class D OC Ratio: Threshold 125.70%; Current 132.19%

Class A/B Interest Coverage (IC) Ratio: Threshold 165.00%; Current 279.79%
Class C IC Ratio: Threshold 135.00%; Current 186.88%
Class D IC Ratio: Threshold 125.00%; Current 155.39%

Collateral Quality Tests
Minimum Diversity Score Test: Threshold 24; Current 22
Maximum Morningstar DBRS Risk Score Test: Threshold 51.65%; Current 29.74%
Minimum Weighted-Average Morningstar DBRS Recovery Rate Test: Threshold 39.63%; Current 49.78%
Minimum Weighted-Average Spread (WAS) Test: Threshold 6.00%; Current 6.431%

Given a static pool, Morningstar DBRS analyzed the actual obligations in the pool as opposed to a hypothetical pool, governed by the covenanted test limitations. Morningstar DBRS analyzed each loan in the pool separately by inputting its credit rating, seniority, country of origin, and industry, among others, into the Morningstar DBRS CLO Insight Model. The credit rating confirmation is a result of the Notes performing within Morningstar DBRS' expectations.

Morningstar DBRS analyzed the transaction using the Morningstar DBRS CLO Insight Model v1.0.1.4 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 the Morningstar DBRS Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024; https://dbrs.morningstar.com/research/443207).

Model-based analysis, which had incorporated the above-mentioned collateral quality breaches, produced satisfactory results. Considering the transaction performance, as well as its legal aspects and structure, Morningstar DBRS confirmed its credit rating on the Class A-1 Notes.

To assess portfolio credit quality, Morningstar DBRS may provide a credit estimate or internal assessment. Credit estimates and internal assessments are not ratings; rather, they represent an abbreviated analysis, including model-driven or statistical components of default probability for each obligor that is used in assigning a rating to a facility sufficient to assess portfolio credit quality.

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 methodologies applicable to the credit rating are the Global Methodology for Rating CLOs and Corporate CDOs, and the CLO Insight Model version 1.0.1.4 (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.

Please, see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings.

The last credit rating action on this issuer took place on March 12, 2024, when Morningstar DBRS confirmed its credit ratings on the debt issued by Cerberus.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Oxana Rhybak, Vice President, Sector Lead
Rating Committee Chair: Jerry van Koolbergen, Managing Director
Initial Rating Date: June 29, 2018

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.