Morningstar DBRS Confirms Vault DI Issuer LLC's Issuer Rating at BBB, Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the Issuer Rating and the credit ratings on the Series 2021, $25 million Class A-1 Variable Funding Note (Class A-1 Notes) and the $225 million Series 2021, Class A-2 Term Note (Class A-2 Notes; together with the Class A-1 Notes, the Senior Notes) issued by Vault DI Issuer LLC (Vault or the Issuer) at BBB with Stable trends. Lease revenue and coverage ratios were stable and above original projections. The Phoenix, Arizona, location remains 42% occupied, and negotiations are under way for a new tenant to lease the remaining space, which would provide additional revenue above Morningstar DBRS' credit rating-case assumptions. Following the execution of a new lease, the Clarksville, Virginia, tenant is in the process of constructing significant improvements and expanding the facility, increasing power capacity to 37.0 megawatts (MW) from 8.4 MW upon completion. Construction is tenant financed, creating additional motivation for lease renewal upon expiry in 2039. The extension of the Class A-1 Notes for an additional year prolonged maturity to July 2026, and no draws on this note have been made.

KEY CREDIT RATING CONSIDERATIONS
The Senior Notes have a 25-year legal maturity and are backed by a portfolio of seven data centers in markets with strong national data center demand and generally attractive power and redundancy configurations. The tenants have all executed long-term leases and demonstrated stickiness with capital investment from the tenants, creating motivation for lease renewal. The portfolio's performance over the last year was above original expectations, achieving a debt service coverage ratio (DSCR) of 3.67 times (x) with no performance penalties incurred. A significant portion of the credit risk is deferred to the refinance in 2026.

Morningstar DBRS' view of the refinancing credit and specifically the project life coverage ratio (PLCR), as of the 2026 refinancing date, constrains the credit rating on the current debt, despite the favorable soft refinancing feature. The refinancing PLCR is sensitive to the interest rate at which the current debt is assumed to be refinanced next year. Considering current global economic uncertainty, Bloomberg published BBB corporate interest rates, and conversations with the Issuer, Morningstar DBRS has assumed a 6% refinancing interest rate for the 2026 refinancing of the Class A-2 Notes. Morningstar DBRS has also taken a conservative view related to cash flow available for debt service (CFADS) in the PLCR calculation, which together with its 6% refinancing interest rate assumption and a 20-year revenue stream results in a 1.21x PLCR, and inclusion of a 25-year revenue stream results in a 1.41x PLCR. The 20-year revenue stream or CFADS included in the calculation of the PLCR reflects a simple average contract expiration, inclusive of renewal options, and legal maturity of the debt in 2046. It is likely the portfolio of data centers will continue to operate for a useful life longer than 20 years. This assumption is supported by the tenant investment made in the expansion of the Clarksville data center. Morningstar DBRS views it as likely that continued capital expenditure investment in the assets, financed in part if not in whole by tenants, will keep this portfolio of data centers operating past the 20-year point. Morningstar DBRS has also leveraged original CFADS expectations in the calculation of the PLCR; for the year ending June 2026, realized CFADS was 10% above original projections.

These conservative assumptions along with the soft refinance and cash sweep feature, whereby a failure to refinance the debt in 2026 results in a cash sweep of all available cash after expenses and interest to pay down principal, reinforce Morningstar DBRS' credit rating of BBB, despite a 20-year PLCR of 1.21x.

CREDIT RATING DRIVERS
The following factors underpin the BBB credit rating: (1) expected stable cash flow deriving from lease payments to the data centers, (2) the resilient and sticky revenue stream resulting from the critical and strategic nature of the data center assets to the tenants' business operations, (3) a strong and favorable debt package to noteholders, and (4) material upside revenue potential from unleased portions of the largest site in the portfolio.

The debt and security package offers protection to noteholders typical of that expected of a well-structured project finance transaction. The primary constraints on the credit rating include: (1) the current interest rate environment and its impact on refinance credit level, which has a significant effect on the credit rating of the current debt; (2) re-leasing risk of each lease at various intervals, subjecting the Issuer to the risk of tenants either opting out of their leases or obliging the Issuer to grant concessions as an inducement for tenants to remain; (3) lower or nonrated tenants; and (4) risks related to technical obsolescence or deterioration of competitive position.

FINANCIAL OUTLOOK
The financing structure and original DSCRs, as calculated based on Morningstar DBRS' credit rating-case assumptions and revenue haircuts at the time of financial close, result in minimum and average DSCRs of 2.56x and 2.78x, respectively (interest coverage ratio), and a July 2026 refinance minimum and average DSCRs of 1.36x and 1.61x. These incorporate the project's constraints and challenges and the refinance interest rate as assumed at financial close.

The higher assumed 2026 refinance rate of 6% results in the referenced 1.21x PLCR, commensurate with a credit rating at the low end of the current credit rating level. The current DSCR of 3.67x, while typically reflective of a higher credit rating, is constrained by the project's refinancing risk, which is somewhat mitigated by the soft refinancing and cash sweep debt features.

CREDIT RATING RATIONALE
The refinance metrics, together with consideration for the minimum and average DSCRs in the first five interest-only years, are consistent with a BBB (low) credit rating. Morningstar DBRS has applied a one-notch uplift to account for the soft refinance nature of the debt, in which a failure to refinance does not lead to a default but rather to a cash sweep where all cash after expenses and interest payments are swept to principal. A higher refinance rate at a level consistent with consensus forecasts and conversations with the Issuer would result in a PLCR of 1.21x more than the 20 years from the refinance point to the expiry of current lease contracts, commensurate with a credit rating at the low end of the current credit rating level.

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) at https://dbrs.morningstar.com/research/454196.

RATING DRIVER ASSESSMENT AND FINANCIAL RISK ASSESSMENT (FRA)

(A) Weighting of Rating Driver Factors
In the analysis of Vault, the Rating Driver factors were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of Vault, the following FRA factor was considered more important: DSCR.

(C) Weighting of the Rating Drivers and the FRA
In the analysis of Vault, the FRA carries greater weight than the Rating Drivers.

Notes:
All figures are in U.S. dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Essential Digital Infrastructure (March 17, 2025),
https://dbrs.morningstar.com/research/450007

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186) which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153 .

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

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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