DBRS Morningstar Finalizes Provisional Rating on the Class A-1 Notes Issued by Deerpath Capital CLO 2020-1 Ltd. and Deerpath Capital CLO 2020-1 LLC

DBRS, Inc. (DBRS Morningstar) finalized its provisional rating of AAA (sf) on the Class A-1 Notes issued by Deerpath Capital CLO 2020-1 Ltd. and Deerpath Capital CLO 2020-1 LLC under the Indenture dated as of April 7, 2020, among Deerpath Capital CLO 2020-1 Ltd. as the Issuer, Deerpath Capital CLO 2020-1 LLC as the Co-Issuer, and U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar) as the Trustee.

The rating on the Class A-1 Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Stated Maturity (as defined in the Indenture referenced above).

The Notes issued by Deerpath Capital CLO 2020-1 Ltd. and Deerpath Capital CLO 2020-1 LLC will be collateralized primarily by a portfolio of U.S. middle-market corporate loans. Deerpath Capital Management, LP will be the Collateral Manager for this transaction.

The finalized rating reflects the following primary considerations:

-- The Indenture dated as of April 7, 2020.
-- The integrity of the transaction structure.
-- DBRS Morningstar’s assessment of the portfolio quality.
-- Adequate credit enhancement to withstand DBRS Morningstar’s projected collateral loss rates under various cash flow-stress scenarios.
-- DBRS Morningstar’s assessment of the origination, servicing, and collateralized loan obligation management capabilities of Deerpath Capital Management, LP.

As of the date of this rating action, DBRS Morningstar met with the Deerpath Capital Management, LP team in person and also performed a telephone operational risk review of Deerpath Capital Management, LP. DBRS Morningstar did not perform an on-site operational risk review of Deerpath Capital at their offices in New York due to the current Coronavirus Disease (COVID-19) outbreak. DBRS Morningstar found Deerpath Capital Management, LP to be an acceptable collateral manager.

To assess portfolio credit quality, DBRS Morningstar may provide a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio not rated by DBRS Morningstar. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that DBRS Morningstar uses in assigning a rating to the Class A-1 Notes.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit (February 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

This is the first rating action since the Initial Rating Date.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Joseph Priolo, Senior Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: March 5, 2020

DBRS Morningstar will publish a full report shortly that will provide addi¬tional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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