DBRS Morningstar Assigns Provisional Ratings to the Secured Notes of BlackRock DLF X CLO 2022-1, LLC

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Notes (together, the Secured Notes) of BlackRock DLF X CLO 2022-1, LLC, pursuant to the Note Purchase and Security Agreement (the NPSA) dated as of August 5, 2022, among BlackRock DLF X CLO 2022-1, LLC, as the Issuer; Wilmington Trust National Association, as Collateral Agent, Custodian, Collateral Administrator, Information Agent, and Note Agent; and the Purchasers referred to therein:

-- Class A-1 Notes at AAA (sf)
-- Class A-2 Notes at AA (high) (sf)
-- Class B Notes at A (low) (sf)
-- Class C Notes at BBB (low) (sf)
-- Class D Notes at BB (sf)
-- Class W Notes at B (sf)

The provisional ratings on the Class A-1 Notes and the Class A-2 Notes address the timely payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of August 5, 2034.

The provisional ratings on the Class B Notes, the Class C Notes, the Class D Notes, and the Class W Notes address the ultimate payment of interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) and the ultimate payment of principal on or before the Stated Maturity of August 5, 2034. The Class W Notes will have a fixed-rate coupon that is lower than the spread/coupon of some of the more-senior Secured Notes. The Class W Notes also benefit from the Class W Note Payment Amount, which allows for principal repayment of the Class W Notes with collateral interest proceeds, in accordance with the Priority of Payments.

Each of the Secured Notes will have a fixed-rate coupon, while the underlying collateral assets are expected to be mostly floating rate. DBRS Morningstar has incorporated the fixed- and floating-rate mismatch into its quantitative analysis, including running interest rate stresses in accordance with its “Cash Flow Assumptions for Corporate Credit Securitizations” methodology. Since a wide disparity exists in the results derived from different interest rate scenarios, DBRS Morningstar ignored the higher interest rate stresses in its analysis in accordance with such methodology.

As of the Closing Date, DBRS Morningstar’s ratings on the Secured Notes will be provisional. The provisional ratings reflect the fact that the finalization of the provisional ratings are subject to certain conditions after the Closing Date, such as compliance with the Eligibility Criteria (as defined in the NPSA).

Provisional ratings are not final ratings with respect to the above-mentioned Secured Notes and may be different than the final ratings assigned or may be discontinued. The assignment of final ratings on the Secured Notes is subject to DBRS Morningstar receiving all data and/or information and final documentation that it deems necessary to finalize the ratings.

The Secured Notes will be collateralized primarily by a portfolio of U.S. middle-market corporate loans. The Issuer will be managed by BlackRock Capital Investment Advisors, LLC (BCIA), which is a wholly owned subsidiary of BlackRock, Inc. DBRS Morningstar considers BCIA an acceptable collateralized loan obligation (CLO) manager.

The provisional ratings reflect the following primary considerations:

(1) The NPSA, dated as of August 5, 2034.
(2) The integrity of the transaction’s structure.
(3) DBRS Morningstar’s assessment of the portfolio quality.
(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 BCIA.

To assess portfolio credit quality, DBRS Morningstar provides 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 a model-driven default probability for each obligor that is used in assigning a rating to a facility.

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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929.

Notes:
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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