Morningstar DBRS Confirms Credit Ratings on the Loans Issued by BTC Offshore Holdings Fund III-B LLC

DBRS, Inc. (Morningstar DBRS) confirmed its following credit ratings on the Class A-R Loans, Class A-T Loans, Class A-D-1 Loans, and Class A-D-2 Loans (together, the Loans) issued by BTC Offshore Holdings Fund III-B LLC as the Borrower; Natixis, New York Branch as Administrative Agent; Citibank, N.A. as Collateral Agent; Alter Domus (US) LLC as Collateral Administrator and Collateral Custodian; and the Lenders party thereto:

-- Class A-R Loans at AA (sf)
-- Class A-T Loans at AA (sf)
-- Class A-D-1 Loans at AA (sf)
-- Class A-D-2 Loans at AA (sf)

The credit ratings on the Loans address the timely payment of interest (excluding the Excess Interest Amounts and the additional 2% interest payable at the Post-Default Rate, as defined in the Credit Agreement) and ultimate return of principal due on or before the Stated Maturity (as defined in the Credit Agreement).

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). BTC Offshore Holdings Fund III-B LLC 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 January 30, 2027. The Final Maturity Date is June 28, 2033.

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 30, 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 Loans, 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 Credit Agreement, dated as of June 28, 2024.
(2) The integrity of the transaction structure.
(3) Morningstar DBRS' assessment of the portfolio quality.
(4) Adequate credit enhancement to withstand projected collateral loss rates under various cash flow stress scenarios.
(5) Morningstar DBRS' assessment of Blue Torch Capital's origination, servicing, and CLO management capabilities.
(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 6.50%; Current 6.99%
Maximum Weighted Average Life: Threshold 5.00; Current 3.60
Minimum Diversity Score: Subject to the CQM; Threshold 22; Current 23.88
Minimum Weighed Average DBRS Recovery Rate: Subject to the CQM; Threshold 47.50%; Current 54.00%
Maximum Weighted Average Risk Score: Subject to the CQM; Threshold 40.90%; Current 30.23%

Coverage Tests
Interest Coverage: Threshold 135.00%; Current 225.28%
Overcollateralization Ratio: Subject to the CQM; Threshold 158.60%; Current 185.13%

Advance Rate Test
Advance Rate Test: Subject to the CQM; Threshold 57.50%; Current 54.02%

Some particular strengths of the transaction are (1) collateral that consists of primarily U.S. senior-secured middle-market corporate loans, (2) the adequate diversification of the portfolio of collateral obligations.

Some challenges were identified: (1) 15% of the portfolio holdings may consist of First-Lien Last Out or Second-Lien Loans, and (2) the underlying collateral portfolio may be insufficient to redeem the Loans in an Event of Default.

As of April 30, 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 Loans.

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.

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.

DBRS, Inc.
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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.