Morningstar DBRS Confirms Credit Ratings on the Class A Notes Issued by CBAM 2018-5, Ltd.

DBRS, Inc. (Morningstar DBRS) confirmed its credit rating of AAA (sf) on the Class A Notes (the Notes) issued by CBAM 2018-5, Ltd. as the Issuer and CBAM 2018-5, LLC as the Co-Issuer (together, with the Issuer, the Co-Issuers).

The Notes were issued pursuant to the Indenture, dated as of March 29, 2018, as amended from time to time, between the Co-Issuers and U.S. Bank National Association (rated AA with a Stable trend by Morningstar DBRS), as the Trustee.

The credit rating on the Notes addresses the timely payment of interest and the ultimate payment of principal in accordance with the terms of the Indenture referred to above.

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating action is a result of Morningstar DBRS' annual review of the transaction performance. The Reinvestment Period ended on April 17, 2023. The Stated Maturity Date is April 17, 2031. In its surveillance review, Morningstar DBRS applied the Level III approach, as described in the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024), and incorporated the Current Profile analysis, given that the transaction is past its reinvestment period.

The Notes issued by the Co-Issuers are collateralized primarily by a portfolio of U.S. senior secured, floating-rate, broadly syndicated, corporate loans. The collateralized loan obligation (CLO) is managed by The Carlyle Group (Carlyle), which acquired the preceding Collateral Manager, CBAM CLO Management, LLC (CBAM). Morningstar DBRS considers Carlyle to be an acceptable CLO manager.

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 Notes to withstand projected collateral loss rates under various cash flow stress scenarios.
(4) The credit quality of the underlying collateral.
(5) Morningstar DBRS' assessment of the origination, servicing, and CLO management capabilities of Carlyle as the Collateral Manager.

The transaction entered its amortization period on April 17, 2023, which assumes limited reinvestment abilities that are subject to the Post-Reinvestment Period Criteria. To account for the primarily static pool, Morningstar DBRS analyzed the actual obligations in the pool, as reported in the trustee report as of May 14, 2025. 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 Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modelled in during its analysis are presented below:

(1) Minimum Floating Spread Test: 3.30%
(2) Minimum Weighted-Average Recovery Rate Test: 47.60
(3) Moody's Diversity Test: 70
(4) Moody's Maximum Rating Factor Test: 3146
(5) Weighted-Average Life (WAL) Test: 3.14

As of May 14, 2025, the transaction is failing four collateral quality tests: the Weighted-Average Life Test (3.14 vs. the maximum threshold of 1.94); the Moody's Diversity Test (70 vs. the minimum threshold of 81); the Moody's Maximum Rating Factor Test (3146; vs. maximum threshold of 3014); the Minimum Floating Spread Test (3.30% vs. the minimum threshold of 3.49%) as well as the concentration limitation in CCC collateral obligations (10.20% vs. the maximum threshold of 7.5%). Failures of this nature are expected to be observed in static transactions well into the amortization period. Morningstar DBRS considered these failures in its analysis.

Some particular strengths of the transaction are (1) collateral quality that consists of at least 90% senior-secured floating-rate broadly-syndicated loans, (2) the adequacy of cash collected from the collateral to pay the interest, and (3) the strong diversification of underlying obligations. Some challenges were identified: (1) the weighted-average credit quality of the underlying obligors may fall below investment grade; (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 the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024). The model-based analysis produced satisfactory results, which supported the credit rating confirmation on the Notes.

Morningstar DBRS notes that a legal analysis, which included but was not limited to legal opinions and various transaction documents, was performed by Morningstar Credit Ratings (MCR). In addition, MCR engaged external counsel as part of its process of assigning new ratings to the CLOs on or prior to the closing date. Morningstar DBRS did not perform additional legal analysis for the purpose of assigning or monitoring ratings to the Notes, unless otherwise indicated in this press release.

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 (May 16, 2025) https://dbrs.morningstar.com/research/454196.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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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 (March 27, 2025) https://dbrs.morningstar.com/research/450750

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.