Morningstar DBRS Assigns Credit Ratings to the Class A Loans of Madison Avenue CLO I LLC

DBRS, Inc. (Morningstar DBRS) assigned credit ratings of AA (sf) to the Class A-R Loans and the Class A-T Loans (together, the Class A Loans) of Madison Avenue CLO I LLC, pursuant to the Credit Agreement dated as of July 15, 2025, entered into between Madison Avenue CLO I LLC as Borrower, Natixis, New York Branch as Administrative Agent, The Bank of New York Mellon Trust Company, National Association as Custodian, and each of the Lenders from time to time party thereto.

The credit ratings on the Class A Loans address the timely payment of interest (excluding any Capped Amounts and the additional 2% interest payable at the Post-Default Rate) and the ultimate return of principal on or before the Stated Maturity (as defined in the Credit Agreement).

CREDIT RATING RATIONALE/DESCRIPTION
The Loans are collateralized primarily by a portfolio of U.S. middle-market corporate loans. Madison Avenue CLO I LLC is managed by 26North Direct Lending II LP, an affiliate of 26North Partners LP. Morningstar DBRS considers 26North Direct Lending II LP to be an acceptable middle-market corporate loan manager. The Reinvestment Period is scheduled to end on July 15, 2027. The Stated Maturity is July 15, 2035.

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 Class A 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 Assets.
(5) Morningstar DBRS' assessment of the CLO management capabilities of 26North Direct Lending II LP as the Collateral Manager.
(6) The legal structure as well as legal opinions addressing certain matters of the Issuer and the consistency with Morningstar DBRS' Legal Criteria for U.S. Structured Finance methodology (the Legal Criteria).

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 matrix (the CQM, as defined in Schedule F of the Credit Agreement). Depending on a given Diversity Score (DScore), the following metrics are selected accordingly from the applicable row of the CQM: Senior Overcollateralization Ratio, Morningstar DBRS Risk Score, Senior Advance Rate, Weighted Average (WA) Recovery Rate, and WA Spread Level. Morningstar DBRS analyzed each structural configuration (row) as a unique transaction, and all configurations passed the applicable Morningstar DBRS rating stress levels. The Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modeled in its base-case analysis are presented below.

Coverage Tests:
Senior Overcollateralization Ratio Test: Subject to CQM; minimum 137.31%
Interest Coverage Ratio Test: minimum 150.00%

Collateral Quality Tests:
Minimum Average Spread: Subject to CQM; min 5.00%
Minimum Average Coupon: 7.00%
Maximum Morningstar DBRS Risk Score: Subject to CQM; max 43.50%
Minimum Weighted Average Recovery Rate: Subject to CQM; min 45.00%
Minimum Diversity Score: Subject to CQM; min 12.50
Maximum Weighted Average Life Test: 8 years from Closing Date
Maximum Senior Advance Rate Test: Subject to CQM; max 67.00%

Some particular strengths of the transaction are (1) the collateral quality, which will consist mostly of senior-secured middle market loans; (2) the adequate diversification of the portfolio of collateral obligations (Minimum Diversity Score Test of 12.50); 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 Class A Loans 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, which incorporated the above-mentioned collateral quality matrix, produced satisfactory results. Considering the analysis, as well as the transaction's legal aspects and structure, Morningstar DBRS assigned the above-referenced credit ratings on the Class A Loans.

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 Class A Loans.

Morningstar DBRS' credit rating on the Class A Loans addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the principal and interest (excluding any Capped Amounts and the additional 2% interest payable at the Post-Default Rate).

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings on the Class A Loans do not address any Capped Amounts, interest payable at the additional 2% Post-Default Rate, Increased Costs, or Indemnified Amounts.

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 factors 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 rating is the Global Methodology for Rating CLOs and Corporate CDOs (July 9, 2025) https://dbrs.morningstar.com/research/458009 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.

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

Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025)
https://dbrs.morningstar.com/research/450750

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.