DBRS Morningstar Upgrades Rating on the Notes Representing the Advances to Cerberus ND Levered LLC

DBRS, Inc. (DBRS Morningstar) upgraded its rating on the Notes representing the Advances to Cerberus ND Levered LLC to AAA (sf) from AA (low) (sf), pursuant to the Amended and Restated Loan, Security and Servicing Agreement, dated as of January 31, 2020 (as amended by First Amendment dated as of July 6, 2020; and Second Amendment dated as of February 17, 2022) (the Loan Agreement), by and among Cerberus ND Levered LLC as the Borrower; Cerberus ND Credit Holdings LLC as the Servicer; Capital One, National Association (rated “A” with a Stable trend by DBRS Morningstar) as the Administrative Agent, Hedge Counterparty, Swingline Lender, and Arranger; U.S. Bank Trust Company, National Association (rated AA (high) with a Stable trend by DBRS Morningstar) as Collateral Custodian; U.S. Bank, National Association (rated AA (high) with a Stable trend by DBRS Morningstar) as Document Custodian; and each of the Lenders from time to time party thereto.

The rating upgrade on the Advances reflects the execution of the Second Amendment to the Amended and Restated Loan, Security and Servicing Agreement, dated as of February 17, 2022. The rating action does not signify DBRS Morningstar’s approval of the amendment or its opinion as to whether the amendment is beneficial or detrimental to the holders of the Advances.

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

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

The rating reflects the following primary considerations:

(1) The Second Amendment to the Amended and Restated Loan, Security And Servicing Agreement, dated as of February 17, 2022.
(2) The Loan Agreement dated as of January 31, 2020, as amended from time to time.
(3) The integrity of the transaction structure.
(4) DBRS Morningstar’s assessment of the portfolio quality.
(5) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(6) 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 amended Loan Agreement referred to above, 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 this Section 2.8, Administrative Expenses senior to the Advances would be uncapped, which could result in downgrades to DBRS Morningstar’s rating on the Advances at that time.

For more information regarding DBRS Morningstar’s additional adjustment for select industries related to the Coronavirus Disease (COVID-19), 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 methodologies are Rating CLOs and CDOs of Large Corporate Credit (January 26, 2022) and Cash Flow Assumptions for Corporate Credit Securitizations (January 26, 2022), 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:

Each of the principal asset class methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. The “Rating CLOs and CDOs of Large Corporate Credit” (January 26, 2022) methodology provides an general overview of the entire rating process and details on asset analysis. The “Cash Flow Assumptions for Corporate Credit Securitizations” (January 26, 2022) methodology outlines the assumptions and analytical approach used in cash flow analysis.

The last rating action on this transaction took place on February 10, 2021.

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, Vice President, U.S. Structured Credit
Rating Committee Chair: Jerry van Koolbergen, Managing Director, U.S. Structured Credit
Initial Rating Date: January 31, 2020

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 2.2.3.1 (January 26, 2022),
https://www.dbrsmorningstar.com/research/391226

-- Cash Flow Assumptions for Corporate Credit Securitizations (January 26, 2022),
https://www.dbrsmorningstar.com/research/391225

-- 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