[sheet: Cover]
| Field | Value |
| Document Title | Closing Funds Flow Memorandum |
| Transaction | Driftwood CLO 2023-I |
| Date | September 12, 2023 |
| Prepared By | Calderwood & Harkness LLP |
| C&H Matter No. | 1024-00004 |
| C&H Billing Code | DARF-CLO-2023I |
| Responsible Partner | Samuel Eklund |
| Billing Partner | Linda Osei |
| Lead Associate | Hannah Brinkley |
| Working Associate | Patrick Gallagher |
| Issuer | Driftwood CLO 2023-I, Ltd. (Cayman Islands exempted company, Reg. No. EX-382916) |
| Co-Issuer | Driftwood CLO 2023-I, LLC (Delaware LLC, DE File No. 7429831) |
| Collateral Manager | Driftwood Credit Management LLC (SEC CRD #182447) |
| Client / Sponsor | Driftwood Absolute Return Fund Ltd. (CIMA Reg. No. MC-2017-02834) |
| Trustee / Paying Agent / Custodian | Ironclad Trust Company, N.A. (DTC Participant No. 2176) |
| Placement Agent | Meridian Atlantic Securities LLC (SEC CRD #39821) |
| Co-Placement Agent | Northbridge Capital Markets Inc. |
| Warehouse Lender / Account Bank | Havenwood Bank, N.A. |
| Closing Date | September 12, 2023 |
| Final Settlement Date | September 20, 2023 (via DTC) |
| Total Deal Value | $400,000,000 |
| Governing Law | New York |
| Offering Exemption | Rule 144A / Regulation S under the Securities Act of 1933 |
| Reference Rate | Compounded SOFR (Actual/360) |
Status
[sheet: Sources of Funds]
| Line Item | Tranche | Rating (CAS / RCR) | CUSIP — 144A | Spread over SOFR (bps) | Par Amount ($) | % of Capital Structure | Payor / Source Entity | Notes |
| 1 | Class A-1 Notes | AAA / AAA | 26738TAA5 | 155 | 256,000,000 | 64.00% | Investors (initial purchasers via Meridian Atlantic Securities LLC) | Reg S CUSIP: G2694LAA7; ISIN (144A): US26738TAA51; Min denomination $250,000 / $1,000 increments |
| 2 | Class A-2 Notes | AA / AA | 26738TAB3 | 190 | 40,000,000 | 10.00% | Investors (initial purchasers via Meridian Atlantic Securities LLC) | Reference tranche; 190 bps per deal terms; Min denomination $250,000 / $1,000 increments |
| 3 | Class B Notes | A / A | 26738TAC1 | 230 | 28,000,000 | 7.00% | Investors (initial purchasers via Meridian Atlantic Securities LLC) | Min denomination $250,000 / $1,000 increments |
| 4 | Class C Notes | BBB / BBB | 26738TAD9 | 310 | 24,000,000 | 6.00% | Investors (initial purchasers via Meridian Atlantic Securities LLC) | Min denomination $250,000 / $1,000 increments |
| 5 | Class D Notes | BB / BB | 26738TAE7 | 625 | 16,000,000 | 4.00% | Investors (initial purchasers via Meridian Atlantic Securities LLC) | Min denomination $250,000 / $1,000 increments |
| 6 | Subordinated Notes (Equity) | NR / NR | 26738TAF4 | Residual | 36,000,000 | 9.00% | Investors (placed by Northbridge Capital Markets Inc.) | Unrated equity; treated as equity for U.S. tax; Min denomination $250,000 / $1 increments; ERISA restricted to non-benefit plan investors |
| Subtotal — Rated Notes | 364,000,000 | 91.00% | WA rated-note spread ≈ 195.49 bps | |||||
| TOTAL SOURCES | 400,000,000 | 100.00% |
[sheet: Uses of Funds]
| Line Item | Description | Payee / Recipient Entity | Amount ($) | Calculation Basis | Wire Reference | Notes |
| 1 | Warehouse Facility Payoff — Principal | Havenwood Bank, N.A. | 212,500,000 | Outstanding warehouse balance at take-out; facility amount $250,000,000 at SOFR + 150 bps; advance rate 85% | DARF-CLO-2023I-WHPAYOFF | Full repayment; warehouse facility dated May 22, 2023 to be terminated per Warehouse Termination & Release Agreement |
| 2 | Warehouse Facility Payoff — Accrued Interest & Fees | Havenwood Bank, N.A. | 985,000 | Estimated accrued interest on $212.5M at SOFR + 150 bps through September 12, 2023, plus facility fees | DARF-CLO-2023I-WHINT | Final amount subject to per diem confirmation from Thomas Eriksen / Kenton & Caldwell LLP |
| 3 | Placement Fee — Lead Placement Agent | Meridian Atlantic Securities LLC | 1,820,000 | 0.50% × $364,000,000 (rated note principal) | DARF-CLO-2023I-PLCMT | Per Note Purchase Agreement dated September 8, 2023 |
| 4 | Co-Placement Fee | Northbridge Capital Markets Inc. | 90,000 | 0.25% × $36,000,000 (subordinated note principal) | DARF-CLO-2023I-COPLCMT | Per Note Purchase Agreement dated September 8, 2023 |
| 5 | Trustee Acceptance Fee | Ironclad Trust Company, N.A. | 25,000 | Flat annual fee — first year payable at closing | DARF-CLO-2023I-TRFEE | Per Indenture dated August 22, 2023; annual fee $25,000; expense cap $50,000 per payment date |
| 6 | Issuer's Counsel Legal Fees | Calderwood & Harkness LLP | 1,250,000 | Estimated; per engagement letter dated May 15, 2023 | DARF-CLO-2023I-SCLEGAL | Includes indenture drafting, warehouse take-out, rating agency process, OM review, tax structuring, Cayman coordination, and closing |
| 7 | Placement Agent's Counsel Legal Fees | Barrington, Locke & Hayes LLP | 475,000 | Estimated; per arrangement with Meridian Atlantic | DARF-CLO-2023I-BLHLEGAL | Gregory Fontaine / Miriam Saldaña |
| 8 | Trustee's Counsel Legal Fees | Ashworth & Pratt LLP | 125,000 | Estimated | DARF-CLO-2023I-APLEGAL | Lillian Marchetti |
| 9 | Warehouse Lender's Counsel Legal Fees | Kenton & Caldwell LLP | 175,000 | Estimated; per arrangement with Havenwood Bank | DARF-CLO-2023I-KCLEGAL | Victor Salazar |
| 10 | Cayman Counsel Legal Fees | Applegategate Offshore Services Ltd. | 85,000 | Estimated; Cayman opinions, corporate formation, regulatory | DARF-CLO-2023I-CAYLEG | Nigel Pemberton |
| 11 | Rating Agency Fee — Brindoval Analytical Services Inc. | Brindoval Analytical Services Inc. | 350,000 | Initial rating and first year surveillance; per engagement letter | DARF-CLO-2023I-CAS | Anita Delgado / Brian Whitford; Class A-1 through D Notes |
| 12 | Rating Agency Fee — Ridgeline Credit Ratings LLC | Ridgeline Credit Ratings LLC | 300,000 | Initial rating and first year surveillance; per engagement letter | DARF-CLO-2023I-RCR | Kenji Matsuda; dual-rated with Brindoval |
| 13 | Accounting / Audit Fees | Greystone Audit Partners LLP | 75,000 | Estimated closing-related accounting fees | DARF-CLO-2023I-AUDIT | |
| 14 | Printing & DTC / Closing Expenses | Various | 50,000 | Estimated OM printing, DTC eligibility, CUSIP registration | DARF-CLO-2023I-MISC | DTC Participant No. 2176 (Ironclad Trust) |
| 15 | Funding of Collection Account (Initial Deposit) | Ironclad Trust Company, N.A. (as Account Bank via Havenwood Bank, N.A.) | 500,000 | Initial deposit to Collection Account per Indenture | DARF-CLO-2023I-COLL | Havenwood Bank as account bank post-closing |
| 16 | Funding of Interest Reserve Account | Ironclad Trust Company, N.A. | 2,000,000 | Estimated first-period interest reserve | DARF-CLO-2023I-INTRSV | First Payment Date: January 15, 2024 |
| 17 | New Collateral Purchases (Remaining Ramp) | Various Loan Sellers / Counterparties | 179,195,000 | Balance of proceeds after all fees and expenses to acquire additional collateral to reach $400M target portfolio par | DARF-CLO-2023I-COLLPURCH | Portfolio ramp ~85% complete as of August 15, 2023; effective date deadline December 12, 2023 |
| TOTAL USES | 400,000,000 | Must equal Total Sources |
[sheet: Sources & Uses Summary]
Category
SOURCES
| Rated Note Proceeds (Class A-1 through D) | 364,000,000 | 91.00% |
| Subordinated Note Proceeds | 36,000,000 | 9.00% |
| Total Sources | 400,000,000 | 100.00% |
USES
| Warehouse Facility Payoff (Principal + Accrued Interest/Fees) | 213,485,000 | 53.37% |
| Placement & Distribution Fees | 1,910,000 | 0.48% |
| Trustee Acceptance Fee | 25,000 | 0.01% |
| Legal Fees (All Counsel) | 2,110,000 | 0.53% |
| Rating Agency Fees | 650,000 | 0.16% |
| Accounting / Audit & Miscellaneous Closing Costs | 125,000 | 0.03% |
| Funding of Transaction Accounts (Collection + Interest Reserve) | 2,500,000 | 0.63% |
| New Collateral Purchases (Remaining Ramp) | 179,195,000 | 44.80% |
| Total Uses | 400,000,000 | 100.00% |
| Balance Check (Sources − Uses) | 0 | Must be $0 |
[sheet: Wire Instructions]
| Line Item | Payee | Payee Contact | Payee Address | Receiving Bank Name | ABA / Routing No. | Account Name | Account Number | Wire Reference | Amount ($) | Notes |
| 1 | Havenwood Bank, N.A. (Warehouse Payoff) | Thomas Eriksen, MD, Structured Finance Lending | 227 West Monroe Street, Chicago, IL 60606 | Havenwood Bank, N.A. | 071-XXX-XXX | Driftwood Warehouse Facility Payoff Account | XXXX-XXXX-7201 | DARF-CLO-2023I-WHPAYOFF | 213,485,000 | Principal $212,500,000 + accrued interest/fees $985,000; final per diem to be confirmed by Kenton & Caldwell LLP (Victor Salazar) |
| 2 | Meridian Atlantic Securities LLC (Placement Fee) | Jonathan Halevy, MD, CLO Structuring | 383 Madison Avenue, 22nd Floor, New York, NY 10179 | [Receiving Bank] | 021-XXX-XXX | Meridian Atlantic Securities LLC — Fee Account | XXXX-XXXX-4410 | DARF-CLO-2023I-PLCMT | 1,820,000 | 0.50% of $364M rated notes |
| 3 | Northbridge Capital Markets Inc. (Co-Placement Fee) | Raymond Cho, SVP, Structured Credit Sales | 1251 Avenue of the Americas, 34th Floor, New York, NY 10020 | [Receiving Bank] | 021-XXX-XXX | Northbridge Capital Markets Inc. — Fee Account | XXXX-XXXX-5522 | DARF-CLO-2023I-COPLCMT | 90,000 | 0.25% of $36M subordinated notes |
| 4 | Ironclad Trust Company, N.A. (Trustee Fee + Account Funding) | Catherine Nowak, VP, Corporate Trust | 100 Wall Street, Suite 1650, New York, NY 10005 | Ironclad Trust Company, N.A. | 021-XXX-XXX | Driftwood CLO 2023-I Trust Account | XXXX-XXXX-8834 | DARF-CLO-2023I-TRFEE | 2,525,000 | Trustee fee $25,000 + Collection Account $500,000 + Interest Reserve $2,000,000; DTC Participant No. 2176 |
| 5 | Calderwood & Harkness LLP (Legal Fees) | Linda Osei, Billing Partner | 450 Park Avenue, New York, NY 10022 | [Receiving Bank] | 021-XXX-XXX | Calderwood & Harkness LLP — Client Trust Account | XXXX-XXXX-1190 | DARF-CLO-2023I-SCLEGAL | 1,250,000 | Per engagement letter dated May 15, 2023 |
| 6 | Barrington, Locke & Hayes LLP (Legal Fees) | Gregory Fontaine, Partner | 601 Lexington Avenue, New York, NY 10022 | [Receiving Bank] | 021-XXX-XXX | Barrington, Locke & Hayes LLP — Fee Account | XXXX-XXXX-3305 | DARF-CLO-2023I-BLHLEGAL | 475,000 | Placement agent's counsel |
| 7 | Ashworth & Pratt LLP (Legal Fees) | Lillian Marchetti, Partner | One Liberty Plaza, 46th Floor, New York, NY 10006 | [Receiving Bank] | 021-XXX-XXX | Ashworth & Pratt LLP — Fee Account | XXXX-XXXX-6671 | DARF-CLO-2023I-APLEGAL | 125,000 | Trustee's counsel |
| 8 | Kenton & Caldwell LLP (Legal Fees) | Victor Salazar, Partner | 200 Park Avenue, New York, NY 10166 | [Receiving Bank] | 021-XXX-XXX | Kenton & Caldwell LLP — Fee Account | XXXX-XXXX-2240 | DARF-CLO-2023I-KCLEGAL | 175,000 | Warehouse lender's counsel |
| 9 | Applegategate Offshore Services Ltd. (Legal Fees) | Nigel Pemberton, Partner | Windward House, 4th Floor, George Town, Grand Cayman KY1-1306 | [Receiving Bank — Cayman] | SWIFT: XXXX | Applegategate Offshore Services Ltd. — Fee Account | XXXX-XXXX-9902 | DARF-CLO-2023I-CAYLEG | 85,000 | Cayman counsel |
| 10 | Brindoval Analytical Services Inc. (Rating Fee) | Anita Delgado, Sr. Director | 55 Water Street, 40th Floor, New York, NY 10041 | [Receiving Bank] | 021-XXX-XXX | Brindoval Analytical Services Inc. — Billing Account | XXXX-XXXX-7788 | DARF-CLO-2023I-CAS | 350,000 | Initial rating fee + first-year surveillance |
| 11 | Ridgeline Credit Ratings LLC (Rating Fee) | Kenji Matsuda, Director | 7 World Trade Center, 30th Floor, New York, NY 10007 | [Receiving Bank] | 021-XXX-XXX | Ridgeline Credit Ratings LLC — Billing Account | XXXX-XXXX-4456 | DARF-CLO-2023I-RCR | 300,000 | Dual-rated with Brindoval |
| 12 | Greystone Audit Partners LLP (Accounting Fee) | — | 345 Hudson Street, New York, NY 10014 | [Receiving Bank] | 021-XXX-XXX | Greystone Audit Partners LLP — Fee Account | XXXX-XXXX-5501 | DARF-CLO-2023I-AUDIT | 75,000 | Closing-related accounting |
| 13 | Various — Printing & DTC / Misc. | — | — | — | — | — | — | DARF-CLO-2023I-MISC | 50,000 | OM printing, DTC eligibility, CUSIP registration |
| 14 | Various Loan Sellers (New Collateral Purchases) | David Hwan, MD, Structured Credit (Driftwood Credit Management LLC) | 200 Brickell Avenue, Suite 3100, Miami, FL 33131 | Multiple counterparty accounts per trade confirmations | Various | Various | Various | DARF-CLO-2023I-COLLPURCH | 179,195,000 | Balance of proceeds for remaining ramp; effective date deadline December 12, 2023 |
[sheet: Key Investor Allocations]
| Investor | Key Contact | Tranche(s) | Allocation Amount ($) | ERISA Eligibility | Notes |
| Marlowe Asset Management Peak Institutional Credit Fund LP | Robert Calloway, Portfolio Manager | Class A-1 Notes | 80,000,000 | ERISA eligible (VCOC/REOC & underwriter's exemption) | Anchor investor |
| Blackpine Insurance Holdings Ltd. | Sarah Liang, CIO | Class A-2 Notes / Class B Notes | 45,000,000 | ERISA eligible (rated notes) | Combined $45M across A-2 and B tranches |
| Stonehill Public Employees' Retirement System | James Whitaker, Director of Fixed Income | Class C Notes / Class D Notes | 22,000,000 | ERISA eligible (rated notes) | Combined $22M across C and D tranches |
| Other Investors (via Meridian Atlantic / Northbridge distribution) | Priya Ramanathan (MAS) / Raymond Cho (Northbridge) | Various | 253,000,000 | Rated Notes: ERISA eligible; Subordinated Notes: restricted to non-benefit plan investors | Balance placed through syndication |