Morningstar DBRS Confirms Provisional Credit Ratings on the Notes Issued by Parliament Funding IV LLC

DBRS, Inc. (Morningstar DBRS) confirmed its following provisional credit ratings on the Class A Notes, the Class B Notes, and the Class C Notes (together, the Notes) issued by Parliament Funding IV LLC pursuant to the Indenture dated June 28, 2024, as most-recently amended by the Third Supplemental Indenture dated March 5, 2025 (the Supplemental Indenture) by and between Parliament Funding IV LLC, as Issuer and State Street Bank and Trust Company, as Trustee:

-- Class A Notes: at (P) AAA (sf)
-- Class B Notes: at (P) BBB (sf)
-- Class C Notes: at (P) BB (low) (sf)

The provisional credit rating on the Class A Notes addresses the timely payment of interest (excluding the post-Event of Default interest rate of 2.00% per annum) and the ultimate payment of principal on or before the Stated Maturity. The provisional credit ratings on the Class B Notes and Class C Notes address the ultimate payment of interest (excluding the post-Event of Default interest rate of 2.00% per annum) and the ultimate payment of principal on or before the Stated Maturity.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of Morningstar DBRS' review of the Supplemental Indenture, which increased the Maximum Principal Amount of the Notes, among other changes. The Reinvestment Period ends on December 31, 2028. The Stated Maturity is January 15, 2037.

The Notes are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer is managed by Owl Rock Diversified Advisors LLC, an affiliate of Blue Owl Capital Inc. Morningstar DBRS considers Owl Rock Diversified Advisors LLC an acceptable collateralized loan obligation (CLO) manager.

The credit ratings reflect the following primary considerations:

(1) The Supplemental Indenture dated March 5, 2025.
(2) The integrity of the transaction's structure.
(3) Morningstar DBRS' assessment of the portfolio quality and covenants.
(4) Adequate credit enhancement to withstand Morningstar DBRS' projected collateral loss rates under various cash flow-stress scenarios.
(5) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of Owl Rock Diversified Advisors LLC.
(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 test matrix (the CQM, as defined in Schedule 5 of the Supplemental Indenture). Depending on a given Diversity Score (DScore), the following metrics are selected accordingly from the applicable row of the CQM: Maximum Average Morningstar DBRS Risk Score Test, and Weighted-Average Spread (WAS). Morningstar DBRS analyzed each structural configuration as a unique transaction, and all configurations (matrix points) passed the applicable Morningstar DBRS rating stress levels. The Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modeled during its analysis are presented below:

(1) Class A Asset Coverage Test: minimum 170.00%; currently 208.81%
(2) Class B Asset Coverage Test: minimum 120.00%; currently 144.77%
(3) Class C Asset Coverage Test: minimum 111.15%; currently 127.74%
(4) Maximum Average Morningstar DBRS Risk Score Test: Subject to the CQM; maximum 41.37%; currently 25.58%
(5) Minimum WAS Test: Subject to the CQM; minimum 4.00%; currently 4.85%
(6) Minimum Weighted Average Coupon Test: minimum 5.00%; currently N/A
(7) Minimum DScore: Subject to the CQM; minimum 8; currently 18.98

The transaction is performing according to the parameters of the Indenture. The Issuer is in compliance with all coverage and collateral quality tests as well as concentration limitations for portfolio collateral obligations per the trustee report as of February 5, 2025.

Some particular strengths of the transaction are (1) the collateral quality, which consists 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 once purchased, and (2) the underlying collateral portfolio may be insufficient to redeem the Notes 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). The Level III Trading Scenarios Approach described in the CLO Methodology was applied and the predictive model was utilized in the Morningstar DBRS' analysis of the transaction.

Model-based analysis produced satisfactory results, which, in addition to Morningstar DBRS' review of the Supplemental Indenture, supported the confirmation of the provisional credit ratings on the Notes.

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 Notes.

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 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.