DBRS Morningstar Assigns Rating to the Class A Variable Funding Notes of Parliament Funding III LLC

DBRS, Inc. (DBRS Morningstar) assigned the rating of BBB (sf) to the Class A Variable Funding Notes (the Notes) issued by Parliament Funding III LLC pursuant to the Indenture dated as of December 1, 2021 (as amended by the First Supplemental Indenture, dated as of March 24, 2022, and the Second Supplemental Indenture, dated as of April 27, 2022) (the Indenture), by and between Parliament Funding III LLC, as Issuer, and State Street Bank and Trust Company, as Trustee.

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

The rating assignment with respect to the above-mentioned Notes is being provided in relation to the execution of the Second Supplemental Indenture dated as of April 27, 2022, entered into between the Issuer and the Trustee.

The Notes will be collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer will be managed by Owl Rock Diversified Advisors LLC. DBRS Morningstar considers Owl Rock Diversified Advisors LLC an acceptable collateralized loan obligation (CLO) manager.

The rating reflects the following primary considerations:

(1) The Indenture, dated as of December 1, 2021 (as amended by the First Supplemental Indenture, dated as of March 24, 2022, and the Second Supplemental Indenture, dated as of April 27, 2022).

(2) The integrity of the transaction’s structure.

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

(4) Adequate credit enhancement to withstand DBRS Morningstar’s projected collateral loss rates under various cash flow-stress scenarios.

(5) DBRS Morningstar’s assessment of the origination, servicing, and CLO management capabilities of Owl Rock Diversified Advisors LLC.

To assess portfolio credit quality, DBRS Morningstar may provide a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio that is not rated by DBRS Morningstar. Credit estimates are not ratings; rather, they represent an abbreviated analysis, including model-driven or statistical components of default probability for each obligor that is used in assigning a rating to a facility sufficient to assess portfolio credit quality.

With regard to the Coronavirus Disease (COVID-19) pandemic, the magnitude and extent of performance stress posed to global structured finance transactions remain highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have already been implemented or will be implemented to soften the impact of the crisis on global economies. However, some regions, jurisdictions, and asset classes are affected more immediately. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis by, for example, front-loading default expectations and/or assessing the liquidity position of a structured finance transaction with more stressful operational risk and/or cash flow timing considerations.

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.

There were no environmental, social, or governance (ESG) factors or considerations with a significant or relevant impact on the credit ratings.

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 Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

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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