Morningstar DBRS Finalizes Provisional Credit Rating of BBB (low), Stable Trend to CION Investment Corporation's Senior Unsecured Notes due December 2029

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit rating of BBB (low) to the $172.5 million Senior Unsecured Notes due December 2029 (the Notes) issued by CION Investment Corporation (CION or the Company). The trend on the credit rating is Stable. The proceeds from the Notes will be entirely used for the repayment of existing secured indebtedness, and as such, is expected to be leverage neutral.

CREDIT RATING RATIONALE
The credit ratings and Stable trend are supported by CION's established franchise, with a long track record as a business development company (BDC) and an experienced management team who have worked together through several business and economic cycles. The credit ratings also consider the Company's strategic reliance on club loan originations often in a non-lead arranger role, which limits its discretion in restructuring problematic credits, as well as CION's recent investment portfolio credit performance deterioration. However, this is balanced by CION's predominantly first lien investment portfolio, which is well diversified, with lower average hold sizes. The credit ratings also incorporate the quality of earnings generation, which has benefitted from higher base rates at the net investment income level, but also has a higher percentage of non-cash payment-in-kind (PIK) income.

The Stable trend considers the lender-friendly private credit market with higher spreads and better documentation is balanced by CION's somewhat constrained origination capacity due to its limited ability to raise new equity capital while operating within its target leverage range.

CREDIT RATING DRIVERS
Over the longer term, strong operating performance, improved credit fundamentals, and strengthened earnings quality would lead to a credit ratings upgrade. Conversely, the credit ratings would be downgraded if there is a sustained increase in gross leverage substantially above the Company's target range. A material increase in non-accrual investments or a sizable loss that significantly reduces the Company's capital buffer to regulatory requirements would also result in a credit ratings downgrade.

Franchise Strength Building Block (BB) Assessment: Good/Moderate

Earnings Power Building Block (BB) Assessment: Moderate

Risk Profile Building Block (BB) Assessment: Good/Moderate

Funding & Liquidity Building Block (BB) Assessment: Moderate

Capitalization Building Block (BB) Assessment: Moderate

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (July 4, 2023).

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

The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions https://www.dbrsmorningstar.com/research/420144/global-methodology-for-rating-non-bank-financial-institutions (September 1, 2023). Other applicable methodologies include Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings: https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (July 4, 2023).

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

The primary sources of information used for this rating include the final Prospectus Supplement and company filings as of October 3, 2024. Morningstar DBRS considers the information available to it for the purposes of providing this credit rating was of satisfactory quality.

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 did have 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com

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