Morningstar DBRS Assigns Provisional Credit Ratings to the Secured Notes of BlackRock DLF X CLO 2025-1, LLC

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, and the Class W Notes (together, the Secured Notes) issued by BlackRock DLF X CLO 2025-1, LLC (the Issuer). The Secured Notes are issued pursuant to the Note Purchase and Security Agreement, dated as of May 30, 2025, among the Issuer, Wilmington Trust, N.A., 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 (sf)
-- Class C Notes at BBB (sf)
-- Class D Notes at BB (sf)
-- Class W Notes at B (sf)

The provisional credit 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 repayment of principal on or before the Stated Maturity of May 30, 2037.

The provisional credit 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 repayment of principal on or before the Stated Maturity of May 30, 2037. The Class W Notes 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.

CREDIT RATING RATIONALE/DESCRIPTION
The Issuer is a cash flow collateralized loan obligation (CLO) transaction that will be collateralized primarily by a portfolio of U.S. senior secured middle-market (MM) corporate loans and managed by BlackRock Capital Investment Advisors, LLC (BlackRock Capital or BCIA) as the Collateral Manager. BlackRock Capital is a wholly owned subsidiary of BlackRock, Inc. (BlackRock). The Reinvestment Period is scheduled to end on May 30, 2029. The Stated Maturity is May 30, 2037.

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 Secured Notes 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 Assets.
(5) Morningstar DBRS' assessment of the CLO management capabilities of BlackRock Capital as the Collateral Manager.
(6) The legal structure as well as legal opinions addressing certain matters of the Issuer and the consistency with Morningstar DBRS' Legal Criteria for U.S. Structured Finance methodology (the Legal Criteria).

The transaction has a dynamic structural configuration that permits variations of certain asset metrics via a selection of an applicable row from a collateral quality matrix (the CQM, as defined in Schedule G of the NPSA). Depending on a given Diversity Score (DScore), the following metrics are selected accordingly from the applicable row of the CQM: Morningstar DBRS Risk Score, Advance Rate, Weighted-Average (WA) Recovery Rate, and WA Spread Level. Morningstar DBRS analyzed each structural configuration (row) as a unique transaction, and all configurations passed the applicable Morningstar DBRS rating stress levels. The Coverage Tests and triggers as well as the Collateral Quality Tests that Morningstar DBRS modeled in its base-case analysis are presented below.

Coverage Tests:
Class A Overcollateralization (OC) Ratio: minimum 134.18%
Class B OC Ratio: minimum 119.11%
Class C OC Ratio: minimum 117.63%
Class D OC Ratio: minimum 112.76%

Class A Interest Coverage (IC) Ratio: minimum 150.00%
Class B IC Ratio: minimum 140.00%
Class C IC Ratio: minimum 120.00%
Class D IC Ratio: minimum 110.00%
Class W IC Ratio: minimum 100.00%

Collateral Quality Tests:
Minimum Weighted Average Spread: Subject to CQM; min 5.00%
Minimum Weighted Average Coupon: 7.00%
Maximum Morningstar DBRS Risk Score: Subject to CQM; min 28.75%
Minimum Weighted Average Recovery Rate: Subject to CQM; min 41.50%
Minimum Diversity Score: Subject to CQM; min 8
Maximum Weighted Average Life Test: 7.25 years from Closing Date
Maximum Advance Rate Level: Subject to CQM; max 85.63

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 Collateral Manager's expertise in CLOs and overall approach to selection of Collateral Loans.

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 Secured Notes in an Event of Default.

Morningstar DBRS analyzed the transaction using the Morningstar DBRS CLO Insight Model and its proprietary cash flow engine, which incorporated assumptions regarding principal amortization, principal prepayment, amount of interest generated, principal prepayments, default timings, and recovery rates, among other credit considerations referenced in the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024). The model-based analysis, which incorporated the above-mentioned collateral quality matrix, produced satisfactory results. Considering the analysis, as well as the transaction's legal aspects and structure, Morningstar DBRS assigned the provisional credit ratings on the Secured Notes.

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 Secured Notes.

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

Morningstar DBRS' credit ratings on the Secured Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the principal and interest (excluding the additional interest payable at the Post-Default Rate, as defined in the NPSA) due on the Secured Notes.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the provisional credit ratings on the Secured Notes do not address any additional interest payable at the Post-Default Rate.

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 ratings is the Global Methodology for Rating CLOs and Corporate CDOs (November 19, 2024) https://dbrs.morningstar.com/research/443207 and the CLO Insight Model v1.0.1.4.

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

A provisional credit rating is not a final credit rating with respect to the above-mentioned Secured Notes and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned Secured Notes are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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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.

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

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

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