DBRS Morningstar Confirms Rating on Notes Representing Advances to Cerberus SWC Levered II LLC

DBRS, Inc. (DBRS Morningstar) confirmed its rating of AA (low) (sf) on the Notes representing the Advances (the Advances) to Cerberus SWC Levered II LLC, pursuant to the Second Amendment to the Second Amended and Restated Loan, Security and Servicing Agreement, dated as of December 23, 2020 (the Loan Agreement) among Cerberus SWC Levered II LLC as the Borrower; Cerberus SWC Levered Holdings II LP as the Servicer; Capital One, National Association (rated “A” with a Stable trend by DBRS Morningstar) as the Administrative Agent; U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar) as the Collateral Custodian; and each Lender from time to time party thereto.

The rating on the Advances addresses the timely payment of Interest, other than Interest attributable to Excess Interest Amounts (as defined in the Loan Agreement) and the ultimate payment of the aggregate principal amount of all Advances outstanding on or before the Facility Maturity Date (as defined in the Loan Agreement).

The Advances are collateralized primarily by a portfolio of U.S. middle-market corporate loans. The servicer for Cerberus SWC Levered II LLC is Cerberus SWC Levered Holdings II LP, an affiliate of Cerberus Capital Management II, L.P. DBRS Morningstar considers Cerberus SWC Levered Holdings II LP to be an acceptable collateralized loan obligation (CLO) servicer.

The above rating confirmation reflects the following primary considerations:

(1) The Second Amendment to the Second Amended and Restated Loan, Security, and Servicing Agreement, dated as of December 23, 2020.

(2) The integrity of the transaction structure.

(3) DBRS Morningstar’s assessment of the portfolio quality.

(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.

(5) DBRS Morningstar’s assessment of the Servicer’s origination, servicing, and CLO management capabilities.

To assess portfolio credit quality, DBRS Morningstar provides 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 is used in assigning ratings to a facility.

Under the Loan Agreement, upon the occurrence and during the continuance of an Event of Default or Termination Date, the Servicer (or, after delivery of a Notice of Exclusive Control, the Administrative Agent) shall direct all available funds to be applied in accordance with Section 2.8 of the Loan Agreement. Under Section 2.8, Administrative Expenses senior to the Advances would be uncapped, which could result in DBRS Morningstar downgrading its rating on the Advances at that time.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the coronavirus, please see its May 18, 2020, commentary, “CLO Risk Exposure to the Coronavirus Disease (COVID-19)” at https://www.dbrsmorningstar.com/research/361112.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is Rating CLOs and CDOs of Large Corporate Credit (February 8, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereigns group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts with the baseline scenarios set forth in the following report:
https://www.dbrsmorningstar.com/research/384150.

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 United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on December 23, 2020.

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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst: Quan Yoon, CFA, Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Head of U.S. Structured Credit, Global Structured Finance
Initial Rating Date: November 20, 2019

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

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

-- Rating CLOs and CDOs of Large Corporate Credit and CLO Asset Model Version 2.2.3 (February 8, 2021),
https://www.dbrsmorningstar.com/research/373423

-- Cash Flow Assumptions for Corporate Credit Securitizations (February 8, 2021),
https://www.dbrsmorningstar.com/research/373422

-- Operational Risk Assessment for Collateralized Loan Obligation (CLO) and Collateralized Debt Obligation (CDO) Managers of Large Corporate Credits (September 20, 2021),
https://www.dbrsmorningstar.com/research/384628

-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 10, 2021),
https://www.dbrsmorningstar.com/research/379958

-- Legal Criteria for U.S. Structured Finance (December 15, 2021),
https://www.dbrsmorningstar.com/research/389789