Morningstar DBRS Confirms its Credit Ratings on the Loans of ABPCI Pacific Funding LP

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Loans issued by ABPCI Pacific Funding LP as follows:

-- Class A-R-1 Loans at AA (sf)
-- Class A-R-2 Loans at AA (sf)
-- Class A-R-3 Loans at AA (sf)
-- Class A-T-1 Loans at AA (sf)
-- Class A-T-2 Loans at AA (sf)
-- Class A-T-3 Loans at AA (sf)
-- Class B Loans at AA (low) (sf)

The Loans were issued pursuant to the Credit Agreement dated November 1, 2022, as amended by Amendment No. 1 to the Credit Agreement, dated May 26, 2023, Amendment No. 2 to the Credit Agreement, dated April 9, 2024, Amendment No. 3 to the Credit Agreement, dated June 26, 2024, and Amendment No. 4 to the Credit Agreement, dated March 7, 2025 among ABPCI Pacific Funding LP, as Borrower; Natixis, New York Branch, as Administrative Agent; U.S. Bank Trust Company, National Association, as Collateral Agent, Collateral Administrator, and Custodian; and the Lenders and the Equity Investors party thereto.

The credit ratings on the Loans address the timely payment of interest (excluding Capped Amounts and the additional 2% interest payable at the Post-Default Rate) (as defined in the Credit Agreement) and the ultimate payment of principal on or before the 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 Amendment No. 4 to the Credit Agreement, dated March 7, 2025 (the Amendment), decreased the Interest Rate Cap and the Applicable Margin; 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). The Reinvestment Period ends on November 1, 2025. The Stated Maturity is November 3, 2032.

The Borrower is a bankruptcy-remote special-purpose vehicle established by AB Private Credit Investors LLC (ABPCI) as the Collateral Manager. The Loans are collateralized primarily by a portfolio of U.S. middle-market corporate loans and other corporate obligations. ABPCI Pacific Funding LP is managed by ABPCI, an affiliate of Alliance Bernstein L.P. Morningstar DBRS considers ABPCI an acceptable collateralized loan obligation (CLO) manager.

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

(1) The Credit Agreement, dated November 1, 2022, as amended from time to time.
(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 ABPCI.
(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.

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 13, 2025, the Borrower is in compliance with all performance metrics. The current transaction performance is within Morningstar DBRS' expectations, as presented below:

(1) Overcollateralization Ratio Test: Subject to CQM; required 153.33%; actual 171.92%
(2) Interest Coverage Ratio Test: required 150.00%; actual 240.50%
(3) Minimum WAS Test: Subject to CQM; required 4.25%; actual 4.62%
(4) Minimum Diversity Score Test: Subject to CQM; required 24; actual 47
(5) Maximum Morningstar DBRS Risk Score Test: Subject to CQM; required 38.00%; actual 33.71%
(6) Minimum Morningstar DBRS WARR Test: required 49.00%; actual 52.40%
(7) Minimum WA 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. As of the February 13, 2025 Trustee Report, there was 1 default totaling approximately $4.15 million registered in the portfolio.

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 particular strengths of the transaction are (1) the collateral quality, which consists mostly of senior-secured middle market loans; (2) the 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 that were identified: (1) the expected weighted-average (WA) credit quality of the underlying obligors may fall below investment grade (per the Collateral Quality Matrix) 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.

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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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.