Morningstar DBRS Confirms Credit Rating on NCL Business Loan Trust 2022-1

On February 22, 2024, DBRS, Inc. (Morningstar DBRS) finalized its Appendix XVIII: U.S. Small Business of the “Rating U.S. Structured Finance Transactions” methodology, after the closure of a request for comment period. Morningstar DBRS also finalized its new exhibits in the “Operational Risk Assessment for U.S. ABS Originators” and “Operational Risk Assessment for U.S. ABS Servicers” methodologies for the U.S. Small Business ABS asset class and a new Appendix XXXIV: U.S. Small Business of the “Morningstar DBRS Master U.S. ABS Surveillance” methodology (collectively, the Methodology Appendices).

As a result of the application of the finalized Methodology Appendices, Morningstar DBRS confirmed the credit rating on one security issued by NCL Business Loan Trust 2022-1:

-- Series 2022-1, Class A Notes at A (sf)

The credit rating action is based on the following analytical considerations:

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2023 Update,” published on December 19, 2023. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse Coronavirus Disease (COVID-19) pandemic scenarios, which were first published in April 2020.

-- Credit enhancement is in the form of overcollateralization, a reserve account, subordination, and excess spread. Credit enhancement levels are sufficient to cover Morningstar DBRS-expected losses at their current respective rating levels.

-- Credit quality of the collateral pool and historical performance. In addition, the transactions are performing in line to inside of Morningstar DBRS’ base-case assumptions.

-- The transaction parties’ capabilities with regard to originating, underwriting, and servicing.

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 Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

Notes:
The principal methodology applicable to the credit ratings is Morningstar DBRS Master U.S. ABS Surveillance (February 22, 2024), https://dbrs.morningstar.com/research/428506.

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.

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

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

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

-- Operational Risk Assessment for U.S. ABS Servicers (February 22, 2024),
https://dbrs.morningstar.com/research/428505
-- Operational Risk Assessment for U.S. ABS Originators (February 22, 2024),
https://dbrs.morningstar.com/research/428504
-- Legal Criteria for U.S. Structured Finance (December 7, 2023),
https://dbrs.morningstar.com/research/425081
-- Rating U.S. Structured Finance Transactions (February 22, 2024)
https://dbrs.morningstar.com/research/428503

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at [email protected].