Morningstar DBRS Confirms Credit Ratings on the Revolving Advances and Term Advances Issued by Cerberus Income Levered LP

DBRS, Inc. (Morningstar DBRS) confirmed its provisional credit ratings on the Revolving Advances and Term Advances (together, the Advances) issued by Cerberus Income Levered LP, pursuant to the Credit and Security Agreement, dated as of November 9, 2023, as amended by Amendment No. 1 to the Credit and Security Agreement, dated August 22, 2024 (the CSA), among Cerberus Income Levered LP, as the Borrower, Cerberus Income Levered Holdings LP, as the Servicer, Société Générale, as the Administrative Agent, Computershare Trust Company, N.A., as the Collateral Agent and Custodian, and the Lenders party thereto:

-- Revolving Advances at AA (sf)
-- Term Advances at AA (sf)

The credit ratings on the Advances address the timely payments of interest (excluding any Excess Interest Amounts, as defined in the CSA) and the ultimate payments of principal on or before the Final Maturity Date (as defined in the CSA).

CREDIT RATING RATIONALE/DESCRIPTION
The credit rating actions are a result of Morningstar DBRS' annual review of the transaction performance and application of the "Global Methodology for Rating CLOs and Corporate CDOs" (the CLO Methodology; November 19, 2024). Cerberus Income Levered LP is a cash flow collateralized loan obligation (CLO) transaction that is collateralized primarily by a portfolio of U.S. senior secured middle-market (MM) corporate loans. The Reinvestment Period is scheduled to end on August 22, 2026. The Final Maturity Date is August 22, 2032.

Morningstar DBRS monitors transaction performance metrics based on the periodicity of the transaction's reporting. The performance metrics include Collateral Quality Tests, Coverage Tests, Concentration Limitations, and Performing Collateral Par. As of April 1, 2025, the Borrower is in compliance with all performance metrics. The current transaction performance is within Morningstar DBRS' expectations, which supports the credit rating confirmations on the Advances, as per the Level I surveillance approach in the CLO Methodology. No model was applied in this review.

In its analysis, Morningstar DBRS considered the following aspects of the transaction:

(1) The transaction's capital structure and the form and sufficiency of available credit enhancement.
(2) Relevant credit enhancement in the form of subordination and excess spread.
(3) The ability of the Advances to withstand projected collateral loss rates under various cash flow stress scenarios.
(4) The credit quality of the underlying collateral and the ability of the transaction to reinvest Principal Proceeds into new Collateral Obligations, subject to the Eligibility Criteria, which include testing the Concentration Limitations, Collateral Quality Tests, and Coverage Tests.
(5) Assessment of the CLO management capabilities of Cerberus Income Levered Holdings LP, an affiliate of Cerberus Capital Management II, L.P., as the Servicer.
(6) The legal structure as well as legal opinions addressing certain matters of the Borrower and the consistency with the Morningstar DBRS Legal Criteria for U.S. Structured Finance methodology (the Legal Criteria).

Some of the performance metrics that Morningstar DBRS reviewed are listed below:

Collateral Quality Tests
Minimum Weighted Average Spread: Subject to the Collateral Quality Matrix (CQM); Threshold 5.75%; Current 6.08%
Weighted Average Life: Threshold 5.25; Current 3.56
Minimum Diversity Score: Subject to the CQM; Threshold 22; Current 33
Minimum Weighed Average DBRS Recovery Rate: Subject to the CQM; Threshold 48%; Current 53.65%
Maximum DBRS Risk Score: Subject to the CQM; Threshold 41; Current 22.54

Coverage Tests
Interest Coverage: Threshold 110%; Current 241.46%
Overcollateralization Ratio: Subject to the CQM; Threshold 150%; Current 176.02%

Advance Rate Test
Senior Advance Rate Test: Subject to the CQM; Threshold 56.81%; Current 56.81%

Some particular strengths of the transaction are (1) the collateral quality, which will consist mostly of senior-secured middle-market loans; (2) the expected adequate diversification of the portfolio of collateral obligations (Diversity Score, matrix driven); and (3) the Servicer's expertise in CLOs and overall approach to selection of Collateral Obligations.

Some challenges were identified: (1) the expected weighted-average credit quality of the underlying obligors may fall below investment grade (per the CQM), and the majority may not have public ratings once purchased, and (2) the underlying collateral portfolio may be insufficient to redeem the Advances in an Event of Default.

As of April 1, 2025, the transaction is in compliance with all the Eligibility Criteria, coverage tests and collateral quality tests. There have not been any defaults in the portfolio to date.

To assess portfolio credit quality, Morningstar DBRS provides a credit estimate or internal assessment for each nonfinancial corporate obligor in the portfolio not rated by Morningstar DBRS. Credit estimates are not ratings; rather, they represent a model-driven default probability for each obligor that Morningstar DBRS uses when rating the Advances.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transaction's respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in US dollars unless otherwise noted.

The principal methodology applicable to the credit rating is the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024) https://dbrs.morningstar.com/research/443207.

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.

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

Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025)
https://dbrs.morningstar.com/research/450750

Operational Risk Assessment for Collateralized Loan Obligations (CLOs) and Corporate Collateralized Debt Obligations (CDOs) (August 23, 2024)
https://dbrs.morningstar.com/research/438315

Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.