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CONFIDENTIAL / ATTORNEY WORK PRODUCT / PRIVILEGED

CALDERWOOD & HARKNESS LLP 450 Park Avenue New York, New York 10022

POST-CLOSING SUMMARY MEMORANDUM

TO: Samuel Eklund, Responsible Partner Linda Osei, Billing Partner Sylvia Hartwell, Specialist Partner, Tax

FROM: Hannah Brinkley, Lead Associate Patrick Gallagher, Working Associate

DATE: September 22, 2023

RE: Post-Closing Summary — Driftwood CLO 2023-I ($400,000,000 Broadly Syndicated CLO)

MATTER NO.: 1024-00004

BILLING CODE: DARF-CLO-2023I

CLIENT: Driftwood Absolute Return Fund Ltd.

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I. Executive Summary

The purpose of this memorandum is to memorialize the successful closing and final settlement of the Driftwood CLO 2023-I transaction (the "Transaction"), a $400,000,000 broadly syndicated cash-flow collateralized loan obligation. This memorandum is intended to serve as the definitive internal record of the firm's representation in connection with this Transaction and to provide a comprehensive summary of the transaction structure, parties, documentation, timeline, and outstanding post-closing items for the engagement team's reference and for permanent filing in the matter file.

Calderwood & Harkness LLP ("C&H" or the "Firm") served as issuer's counsel to Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF") in connection with the structuring, warehouse take-out, indenture negotiation, rating-agency process, offering memorandum review, tax structuring, Cayman law coordination, and closing of the Transaction. Our representation encompassed all aspects of the Transaction from engagement inception through final settlement, including the negotiation of all principal transaction documents, coordination with multiple counterparties and their respective counsel, management of the dual-rating agency process, oversight of the warehouse facility take-out mechanics, and the preparation and delivery of all closing deliverables.

The Transaction involved the issuance of six tranches of notes — five rated tranches (Class A-1, Class A-2, Class B, Class C, and Class D) and one unrated equity tranche (Subordinated Notes) — backed by a portfolio of broadly syndicated first-lien senior secured leveraged loans with obligors primarily domiciled in the United States. The notes were offered and sold in reliance upon the exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), provided by Rule 144A and Regulation S thereunder.

The key milestones of the Transaction were as follows:

• Signing: August 22, 2023 — Execution and delivery of the Indenture, Collateral Management Agreement, Co-Issuance Agreement, Collateral Administration Agreement, and ancillary transaction documents.

• Pricing: September 8, 2023 — Final pricing of all note tranches; execution and delivery of the First Supplemental Indenture (reflecting final pricing spreads and CUSIPs), the Note Purchase Agreement, and receipt of rating confirmation letters from both rating agencies.

• Closing / Note Issuance: September 12, 2023 — Issuance of all notes; full repayment and take-out of the warehouse credit facility; delivery of all legal opinions, officer's and secretary's certificates, and other closing deliverables; assignment of collateral from the warehouse to the CLO Issuer and pledge to the Trustee.

• Final Settlement: September 20, 2023 — Final settlement of all note tranches through the facilities of The Depository Trust Company ("DTC").

The Transaction is now closed and completed. Certain post-closing compliance items remain outstanding, most notably the satisfaction of the Effective Date conditions set forth in the Indenture, which must be achieved by December 12, 2023 (90 days following the Pricing Date). These items are described in greater detail in Section XIV of this memorandum.

II. Transaction Parties

Set forth below is a comprehensive summary of all principal parties to the Transaction, including their respective roles, organizational details, and key contacts.

A. Issuer / Co-Issuer

Driftwood CLO 2023-I, Ltd. (the "Issuer") is an exempted company with limited liability organized under the laws of the Cayman Islands, registered with the Cayman Islands Registrar of Companies under Registration Number EX-382916. The Issuer was formed as a special purpose vehicle for the sole purpose of issuing the notes and acquiring, holding, and managing the collateral portfolio in connection with the Transaction. The Issuer's registered office is located at PO Box 4927, Windward House, 3rd Floor, George Town, Grand Cayman KY1-1306, Cayman Islands. The Issuer is the primary obligor on all tranches of notes issued in the Transaction.

Driftwood CLO 2023-I, LLC (the "Co-Issuer") is a limited liability company organized under the laws of the State of Delaware, filed with the Delaware Secretary of State under File Number 7429831. The Co-Issuer's registered agent is National Registered Agents Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. The Co-Issuer was formed as a co-issuer of the rated notes for the purpose of facilitating the offering and sale of the notes to U.S. investors in reliance upon the Rule 144A exemption. The Co-Issuer is classified as a disregarded entity for United States federal income tax purposes, as further described in Section XIII of this memorandum. The Co-Issuer's sole member is the Issuer, and it is governed by an LLC Agreement dated August 22, 2023.

B. Client / Sponsor

Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF") is an exempted company organized under the laws of the Cayman Islands and registered with the Cayman Islands Monetary Authority ("CIMA") under Registration Number MC-2017-02834. Driftwood's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131. As of the first quarter of 2023, Driftwood had approximately $6.8 billion in assets under management across multiple investment strategies, including credit, structured products, and event-driven investing.

Driftwood served as the sponsor of the Transaction and is the ultimate parent entity of the Collateral Manager. The key principals at Driftwood involved in the Transaction were:

• Marcus Sorensen — Founder and Chief Investment Officer

• Elena Voss — President and Chief Operating Officer

• David Hwan — Managing Director, Structured Credit; portfolio manager for the CLO platform and the individual primarily responsible for day-to-day management of the collateral portfolio

C. Collateral Manager

Driftwood Credit Management LLC ("DCM" or the "Collateral Manager") is a limited liability company organized under the laws of the State of Delaware. DCM is a registered investment adviser with the U.S. Securities and Exchange Commission (CRD Number 182447) and is a wholly owned subsidiary of Driftwood. DCM is responsible for the selection, acquisition, and ongoing management of the collateral pool, including all trading activity during the Reinvestment Period. DCM's rights and obligations are governed by the Collateral Management Agreement dated August 22, 2023 between the Issuer and DCM. The fee structure applicable to DCM is set forth in Section VII of this memorandum.

D. Structuring Lead / Placement Agents

Meridian Atlantic Securities LLC ("Meridian Atlantic") served as lead structuring agent and initial purchaser/placement agent for the Transaction. Meridian Atlantic is a registered broker-dealer (SEC CRD Number 39821) with offices at 383 Madison Avenue, 22nd Floor, New York, New York 10179. Meridian Atlantic was responsible for structuring the capital stack, coordinating the marketing and distribution of the rated notes, and facilitating the pricing process. The key contacts at Meridian Atlantic were:

• Jonathan Halevy — Managing Director, CLO Structuring

• Priya Ramanathan — Director, CLO Distribution

Northbridge Capital Markets Inc. ("Northbridge") served as co-placement agent for the Transaction, with primary responsibility for the distribution of the Subordinated Notes. Northbridge's offices are located at 1251 Avenue of the Americas, 34th Floor, New York, New York 10020. The key contact at Northbridge was:

• Raymond Cho — Senior Vice President, Structured Credit Sales

E. Trustee / Collateral Administrator / Paying Agent / Registrar / Custodian

Ironclad Trust Company, N.A. ("Ironclad Trust" or the "Trustee") is a national banking association organized and existing under the laws of the United States, with offices at 100 Wall Street, Suite 1650, New York, New York 10005. Ironclad Trust serves in multiple capacities under the Transaction, including as Trustee under the Indenture, Collateral Administrator under the Collateral Administration Agreement, Paying Agent, Registrar, Transfer Agent, and Custodian. Ironclad Trust's DTC Participant Number is 2176. The key contact at Ironclad Trust was:

• Catherine Nowak — Vice President, Corporate Trust

F. Warehouse Lender / Account Bank

Havenwood Bank, N.A. ("Havenwood Bank") is a national banking association organized and existing under the laws of the United States, with offices at 227 West Monroe Street, Chicago, Illinois 60606. Havenwood Bank provided the warehouse credit facility that was used to fund the initial acquisition of collateral during the warehouse ramp period prior to the CLO closing. Havenwood Bank also serves as account bank for certain transaction accounts. The key contact at Havenwood Bank was:

• Thomas Eriksen — Managing Director, Structured Finance Lending

G. Rating Agencies

Brindoval Analytical Services Inc. ("Brindoval" or "CAS") is a nationally recognized statistical rating organization ("NRSRO") registered with the SEC, with offices at 55 Water Street, 40th Floor, New York, New York 10041. Brindoval assigned ratings to each of the rated note tranches. The key contacts at Brindoval were:

• Anita Delgado — Senior Director

• Brian Whitford — Lead Analyst

Ridgeline Credit Ratings LLC ("Ridgeline" or "RCR") is a nationally recognized statistical rating organization registered with the SEC, with offices at 7 World Trade Center, 30th Floor, New York, New York 10007. Ridgeline assigned ratings to each of the rated note tranches. The key contact at Ridgeline was:

• Kenji Matsuda — Director, CLO Ratings

H. Counsel. The following law firms served in their respective capacities in connection with the Transaction:

Calderwood & Harkness LLP — Issuer's Counsel. 450 Park Avenue, New York, New York 10022. The C&H engagement team consisted of the following professionals:

• Samuel Eklund — Responsible Partner

• Linda Osei — Billing Partner

• Hannah Brinkley — Lead Associate

• Patrick Gallagher — Working Associate

• Sylvia Hartwell — Specialist Partner, Tax

Barrington, Locke & Hayes LLP — Placement Agent's Counsel. 601 Lexington Avenue, New York, New York 10022. The principal contacts were:

• Gregory Fontaine — Partner

• Miriam Saldaña — Associate

Ashworth & Pratt LLP — Trustee's Counsel. One Liberty Plaza, 46th Floor, New York, New York 10006. The principal contact was:

• Lillian Marchetti — Partner

Kenton & Caldwell LLP — Warehouse Lender's Counsel. 200 Park Avenue, New York, New York 10166. The principal contact was:

• Victor Salazar — Partner

Applegategate Offshore Services Ltd. — Cayman Counsel. Windward House, 4th Floor, George Town, Grand Cayman KY1-1306, Cayman Islands. The principal contact was:

• Nigel Pemberton — Partner

I. Independent Auditors

Greystone Audit Partners LLP — 345 Hudson Street, New York, New York 10014. Greystone was engaged by the Issuer and the Collateral Manager for audit and reporting purposes in connection with the Transaction on an ongoing basis.

J. Key Investors / Anchor Noteholders

The following institutional investors participated as anchor or significant noteholders in the Transaction. This information is provided for internal reference purposes only and is subject to the confidentiality obligations set forth in the Note Purchase Agreement and applicable side letters.

Marlowe Asset Management Peak Institutional Credit Fund LP — Anchor investor in the Class A-1 Notes with an initial allocation of approximately $80,000,000 in principal amount. The key contact was:

• Robert Calloway — Portfolio Manager

Blackpine Insurance Holdings Ltd. — Investor in the Class A-2 Notes and Class B Notes with a combined initial allocation of approximately $45,000,000 in principal amount. The key contact was:

• Sarah Liang — Chief Investment Officer

Stonehill Public Employees' Retirement System — Investor in the Class C Notes and Class D Notes with a combined initial allocation of approximately $22,000,000 in principal amount. The key contact was:

• James Whitaker — Director of Fixed Income

III. Transaction Timeline

The following table sets forth a comprehensive chronological summary of the principal milestones and events in the Transaction from engagement inception through final settlement.

IV. Final Capital Structure

A. Summary Table

The final capital structure of Driftwood CLO 2023-I is set forth in the table below. All notes were issued on the Closing Date (September 12, 2023) and settled through DTC on the Final Settlement Date (September 20, 2023).

Additional security identifiers are as follows:

• Class A-1 Notes (Regulation S): CUSIP G2694LAA7

• Class A-1 Notes (144A): ISIN US26738TAA51

The total principal amount of rated notes is $364,000,000. The total principal amount of unrated subordinated equity is $36,000,000. The reference spread for the Transaction, as determined by the placement agent and set forth in the Note Purchase Agreement, is 190 basis points (corresponding to the Class A-2 tranche). The weighted average rated-note spread is approximately 195.49 basis points, computed as the aggregate of (individual tranche spread × individual tranche principal amount) for all rated tranches, divided by total rated note principal (i.e., 71,160 ÷ 364.00 ≈ 195.49 bps).

B. Key Structural Terms

The following summarizes the key structural terms applicable to the notes as set forth in the Indenture and the First Supplemental Indenture:

• Reference Rate: Compounded SOFR, determined in accordance with the SOFR compounding methodology set forth in the Indenture, with a 26253 fallback convention (as defined in the Indenture) applicable in the event that SOFR is unavailable or discontinued.

• Day Count Convention: Actual/360 for all tranches.

• Minimum Denomination (Rated Notes): $250,000 in initial principal amount, with increments of $1,000 in excess thereof.

• Minimum Denomination (Subordinated Notes): $250,000 in initial principal amount, with increments of $1 in excess thereof.

• Offering Exemption: All notes were offered and sold in reliance upon Rule 144A and Regulation S under the Securities Act of 1933, as amended.

• Payment Date Frequency: Quarterly, occurring on the 15th day of January, April, July, and October of each year (or, if such day is not a Business Day, the next succeeding Business Day).

• Record Date: The 15th calendar day preceding each Payment Date (or, if such day is not a Business Day, the immediately preceding Business Day).

• First Payment Date: January 15, 2024.

C. Subordination Levels

The credit enhancement provided by subordination for each rated tranche, expressed as a percentage of the total capital structure, is as follows:

These subordination levels were established in consultation with both Brindoval and Ridgeline during the structuring process and are consistent with the subordination levels required by each agency's respective CLO rating methodology to achieve the assigned ratings.

D. Key Dates

The following key dates govern the lifecycle of the Transaction:

• Non-Call Period: Two years from the Closing Date. The Non-Call Period expires on September 12, 2025. During the Non-Call Period, the notes may not be redeemed or refinanced at the option of the Issuer or the holders of the Subordinated Notes.

• Reinvestment Period: Five years from the Closing Date. The Reinvestment Period expires on September 12, 2028. During the Reinvestment Period, DCM as Collateral Manager may reinvest principal proceeds received on the collateral portfolio into new eligible collateral obligations, subject to the portfolio quality tests and trading constraints set forth in the Indenture.

• Stated Maturity: October 15, 2036. All outstanding notes mature and become due and payable on the Stated Maturity, subject to earlier redemption or acceleration in accordance with the terms of the Indenture.

V. Collateral Pool and Eligibility Criteria

The collateral pool underlying the Transaction consists of broadly syndicated first-lien senior secured leveraged loans, with obligors primarily domiciled in the United States. The target portfolio par amount is $400,000,000. As of the Closing Date, the portfolio was approximately 85% ramped, with the remaining collateral to be acquired by DCM during the post-closing ramp period. The Effective Date Deadline, by which the portfolio must be fully ramped and all collateral quality tests must be satisfied, is December 12, 2023 (90 days following the Pricing Date of September 8, 2023).

A. Key Collateral Quality Tests (per Indenture)

The Indenture establishes the following collateral quality tests, which must be satisfied as of the Effective Date and, on an ongoing basis, in connection with each reinvestment trade during the Reinvestment Period:

These collateral quality tests reflect the parameters agreed upon with both Brindoval and Ridgeline during the rating agency process and are incorporated in the Indenture as conditions to reinvestment trading and Effective Date compliance.

B. Coverage Tests

The Indenture establishes overcollateralization ("O/C") tests and interest coverage ("I/C") tests that are calculated on each Determination Date (occurring prior to each Payment Date). Failure to satisfy any O/C or I/C test triggers a diversion of cash flows in the priority of payments waterfall to cure the applicable test.

Overcollateralization Tests:

Interest Coverage Tests:

VI. Warehouse Facility Take-Out

The warehouse credit facility played a central role in the Transaction by providing the Issuer with interim financing to acquire collateral during the pre-closing ramp period. Set forth below is a comprehensive summary of the warehouse facility and its take-out at closing.

Warehouse Facility Terms. On May 22, 2023, Driftwood CLO 2023-I, Ltd. (as borrower) and Havenwood Bank, N.A. (as lender) executed a $250,000,000 revolving credit facility (the "Warehouse Facility"). The Warehouse Facility provided for advances at a rate of 85% of eligible collateral par, bearing interest at SOFR plus 150 basis points. The Warehouse Facility was documented by Kenton & Caldwell LLP, counsel to Havenwood Bank (Victor Salazar, Partner).

Ramp Period. The warehouse ramp commenced on May 25, 2023, at which time DCM began acquiring eligible broadly syndicated loans under the Warehouse Facility. By August 15, 2023, the warehouse portfolio was approximately 85% ramped toward the target par amount of $400,000,000. DCM continued to selectively acquire additional collateral during the period between signing and closing.

Outstanding Balance at Take-Out. As of the Closing Date (September 12, 2023), the outstanding principal balance under the Warehouse Facility was $212,500,000.

Take-Out Mechanics. On the Closing Date, the Warehouse Facility was repaid in full from the proceeds of the CLO note issuance. The take-out was effectuated through the following sequence of transactions and documents:

1. Warehouse Payoff Letter — Dated September 12, 2023, issued by Havenwood Bank, N.A. The payoff letter confirmed the total outstanding balance, accrued and unpaid interest, any applicable breakage costs, and wire instructions for the payoff amount.

2. Warehouse Facility Termination & Release Agreement — Dated September 12, 2023, executed by Driftwood CLO 2023-I, Ltd. and Havenwood Bank, N.A. This agreement formally terminated the Warehouse Facility in its entirety and released all liens, security interests, and encumbrances held by Havenwood Bank on the collateral portfolio and related assets.

3. Assignment of Collateral — Dated September 12, 2023, pursuant to which the collateral held under the Warehouse Facility was transferred and assigned from the warehouse structure to Driftwood CLO 2023-I, Ltd. (the CLO Issuer) and simultaneously pledged to Ironclad Trust Company, N.A. under the terms of the Indenture.

Havenwood Bank's counsel, Kenton & Caldwell LLP (Victor Salazar), coordinated closely with C&H on the preparation and execution of all termination and release documentation. All wire transfers related to the warehouse take-out were executed on the Closing Date in accordance with the Closing Funds Flow Memorandum, and Havenwood Bank confirmed receipt of the payoff amount in full on September 12, 2023.

VII. Fee Structure Summary

The following table summarizes the fee arrangements applicable to the principal service providers in the Transaction, as set forth in the applicable transaction documents:

The aggregate collateral management fees (senior and subordinate combined) total 0.50% per annum on aggregate collateral par, or $2,000,000 per year at full target par. The subordinate management fee and the incentive management fee are both subordinate in the waterfall to the payment of interest on all rated note tranches and certain senior administrative expenses, providing structural protection to rated noteholders.

VIII. Closing Funds Flow Summary

The Closing Funds Flow Memorandum, dated September 12, 2023, was prepared by C&H and approved by all transaction parties prior to closing. The memorandum set forth the sources and uses of funds on the Closing Date, together with wire instructions for all counterparties. A summary of the sources and uses is set forth below.

A. Sources of Funds

The total sources of funds on the Closing Date were $400,000,000, consisting of the aggregate proceeds of all note tranches:

B. Uses of Funds

The proceeds of the note issuance were applied on the Closing Date as follows:

The Closing Funds Flow Memorandum, dated September 12, 2023, included detailed wire instructions for all counterparties, account numbers, ABA routing numbers, and reference information for each wire transfer. All wires were initiated on the Closing Date and confirmed as received by all counterparties. The Funds Flow Memorandum is cross-referenced as Appendix D to this memorandum.

IX. Ratings Process Summary

The notes are dual-rated by Brindoval Analytical Services Inc. ("Brindoval" or "CAS") and Ridgeline Credit Ratings LLC ("Ridgeline" or "RCR"), both nationally recognized statistical rating organizations registered with the SEC. The following is a chronological summary of the ratings process:

Rating Agency Presentations. On June 12, 2023, the C&H team, together with DCM (David Hwan) and Meridian Atlantic (Jonathan Halevy), delivered the initial rating agency presentation to Brindoval (Anita Delgado, Senior Director, and Brian Whitford, Lead Analyst). The presentation covered the Driftwood platform overview, the track record of the structured credit team, the portfolio construction criteria, the proposed capital structure and subordination levels, and the collateral eligibility criteria. On June 19, 2023, a substantively similar presentation was delivered to Ridgeline (Kenji Matsuda, Director, CLO Ratings), supplemented with additional analytics and cash flow modeling tailored to Ridgeline's proprietary rating methodology.

Model Review. Following the presentations, both rating agencies conducted extensive independent model reviews and cash flow analyses of the proposed transaction structure. The rating agency model review process was completed by July 28, 2023. During this period, C&H coordinated multiple rounds of follow-up questions and data requests between the rating agencies and DCM.

Preliminary Ratings. On August 4, 2023, both Brindoval and Ridgeline issued preliminary ratings for all five rated note tranches. These preliminary ratings were consistent with the final ratings ultimately assigned and provided the basis for the distribution of the Preliminary Offering Memorandum to prospective investors.

Final Rating Confirmations. On September 8, 2023 (the Pricing Date), both Brindoval and Ridgeline delivered final rating confirmation letters confirming the ratings for each rated tranche in the amounts and at the spreads set forth in the First Supplemental Indenture. The final confirmed ratings are as follows:

The Subordinated Notes are unrated. Rating agency engagement letters were executed with both Brindoval and Ridgeline at the outset of the ratings process and are included in the closing binder as part of the rating agency documentation package.

X. Legal Opinions Delivered at Closing

All legal opinions described below were delivered on September 12, 2023 (the Closing Date) as conditions to closing under the Indenture and the Note Purchase Agreement. Each opinion was delivered in customary form and subject to customary qualifications, assumptions, and exceptions.

1. U.S. Legal Opinion — Calderwood & Harkness LLP. Addressed to Ironclad Trust Company, N.A. (as Trustee) and Meridian Atlantic Securities LLC (as Placement Agent). This opinion addressed the following matters:

(a) Due organization, valid existence, and good standing of Driftwood CLO 2023-I, LLC (the Co-Issuer) under the laws of the State of Delaware;

(b) Due authorization, execution, and delivery by the Co-Issuer of the Indenture, the First Supplemental Indenture, the Co-Issuance Agreement, and the notes;

(c) Enforceability of the Indenture, the First Supplemental Indenture, and the notes against the Co-Issuer in accordance with their respective terms, subject to customary bankruptcy, insolvency, and equitable principles exceptions;

(d) Valid issuance of the notes in accordance with the terms of the Indenture;

(e) No violation of, or conflict with, the Co-Issuer's certificate of formation or LLC agreement, or any applicable federal or New York law or regulation, as a result of the execution and delivery of the transaction documents;

(f) Exemption of the Issuer from registration as an "investment company" under the Investment Company Act of 1940, as amended, pursuant to Rule 3a-7 thereunder; and

(g) No requirement for the Issuer to register as an "investment company" under the Investment Company Act upon completion of the Transaction.

2. Tax Opinion — Calderwood & Harkness LLP (Sylvia Hartwell). Addressed to Driftwood CLO 2023-I, Ltd. (the Issuer) and Ironclad Trust Company, N.A. (as Trustee). This opinion addressed the following matters:

(a) The Issuer will not be treated as engaged in a trade or business within the United States for purposes of the Internal Revenue Code of 1986, as amended (the "Code"), and accordingly will not be subject to U.S. federal income tax on a net income basis;

(b) Driftwood CLO 2023-I, LLC (the Co-Issuer) will be treated as a disregarded entity for U.S. federal income tax purposes, separate from its sole owner (the Issuer); and

(c) The rated notes (Classes A-1 through D) will be treated as debt for U.S. federal income tax purposes, while the Subordinated Notes will be treated as equity interests in the Issuer for U.S. federal income tax purposes.

3. Cayman Legal Opinion — Applegategate Offshore Services Ltd. (Nigel Pemberton). Addressed to Ironclad Trust Company, N.A. (as Trustee) and Meridian Atlantic Securities LLC (as Placement Agent). This opinion addressed the following matters:

(a) Due incorporation and valid existence of the Issuer as an exempted company with limited liability under the laws of the Cayman Islands;

(b) Good standing of the Issuer with the Cayman Islands Registrar of Companies;

(c) Corporate power and authority of the Issuer to enter into and perform its obligations under the transaction documents;

(d) Enforceability of the Indenture, the notes, and other transaction documents against the Issuer under the laws of the Cayman Islands (subject to customary qualifications); and

(e) Confirmation that, under current Cayman Islands law, no taxes are imposed on the Issuer in the Cayman Islands on income, profits, capital gains, or other amounts, and that the Issuer has obtained a tax undertaking from the Governor in Cabinet of the Cayman Islands.

4. Trustee's Counsel Opinion — Ashworth & Pratt LLP (Lillian Marchetti). Addressed to the Issuer, the Co-Issuer, and Meridian Atlantic Securities LLC. This opinion addressed:

(a) Due organization and valid existence of Ironclad Trust Company, N.A. as a national banking association under the laws of the United States;

(b) Corporate power and authority of Ironclad Trust to enter into and perform its obligations under the Indenture and ancillary documents; and

(c) Due authorization, execution, and delivery of the Indenture, the Collateral Administration Agreement, and related documents by Ironclad Trust.

XI. Closing Certificates and Corporate Authorizations

The following certificates and corporate authorization documents were delivered at or prior to closing, as conditions to closing under the Indenture and the Note Purchase Agreement:

1. Officer's Certificate of the Issuer. Dated September 12, 2023, executed by an authorized officer of Driftwood CLO 2023-I, Ltd. The Officer's Certificate certified the following:

(a) All conditions precedent to the issuance of the notes under the Indenture and the Note Purchase Agreement had been satisfied or waived;

(b) All representations and warranties of the Issuer contained in the Indenture, the Note Purchase Agreement, and each other transaction document were true and correct in all material respects as of the Closing Date;

(d) The collateral portfolio complied with all applicable collateral quality tests set forth in the Indenture as of the Closing Date (subject to the post-closing ramp and Effective Date compliance requirements).

2. Secretary's Certificate of the Issuer. Dated September 12, 2023, executed by an authorized officer of Driftwood CLO 2023-I, Ltd. The Secretary's Certificate certified the following:

(a) The incumbency and specimen signatures of each authorized signatory of the Issuer authorized to execute and deliver the transaction documents;

(b) Attached as exhibits the board resolutions of the Issuer authorizing the Transaction (described below); and

(c) Attached as an exhibit the Memorandum and Articles of Association of the Issuer, certified as being true, complete, and correct as of the Closing Date.

3. Board Resolutions — Driftwood CLO 2023-I, Ltd. Written resolutions of the board of directors of the Issuer, dated August 20, 2023, unanimously authorizing the execution and delivery of the Indenture, the First Supplemental Indenture, the Collateral Management Agreement, the Co-Issuance Agreement, the Note Purchase Agreement, and each other transaction document to which the Issuer is a party, and the issuance of all tranches of notes.

4. Board Resolutions (Sole Member Consent) — Driftwood CLO 2023-I, LLC. Written consent of the sole member (Driftwood CLO 2023-I, Ltd.) of the Co-Issuer, dated August 20, 2023, authorizing the execution and delivery of the Indenture, the First Supplemental Indenture, and the Co-Issuance Agreement by the Co-Issuer in its capacity as co-issuer of the rated notes.

Additional corporate formation documents included in the closing binder are the Certificate of Formation of the Co-Issuer (filed with the Delaware Secretary of State), the Memorandum and Articles of Association of the Issuer (filed with the Cayman Islands Registrar of Companies under Registration Number EX-382916), and the LLC Agreement of the Co-Issuer dated August 22, 2023.

XII. Transaction Documents Summary

Set forth below is a comprehensive index of all transaction documents executed and delivered in connection with the Transaction. All documents are included in the closing binder, which is being assembled by the C&H engagement team as described in Section XIV below.

A. Core Transaction Documents

All of the following documents have been fully executed and delivered:

1. Indenture — Dated as of August 22, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood CLO 2023-I, LLC (as Co-Issuer), and Ironclad Trust Company, N.A. (as Trustee). Governs the issuance of the notes, the priority of payments, the collateral quality tests, the coverage tests, and the rights and obligations of the Issuer, the Co-Issuer, and the Trustee.

2. First Supplemental Indenture — Dated as of September 8, 2023, among the Issuer, the Co-Issuer, and the Trustee. Supplements the Indenture to reflect final pricing spreads, CUSIPs, ISINs, and other terms finalized at pricing.

3. Collateral Management Agreement — Dated as of August 22, 2023, between Driftwood CLO 2023-I, Ltd. (as Issuer) and Driftwood Credit Management LLC (as Collateral Manager). Governs the appointment, rights, duties, and compensation of DCM as collateral manager.

4. Collateral Administration Agreement — Dated as of August 22, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood Credit Management LLC (as Collateral Manager), and Ironclad Trust Company, N.A. (as Collateral Administrator). Governs the collateral administration and reporting functions performed by Ironclad Trust.

5. Note Purchase Agreement — Dated as of September 8, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood CLO 2023-I, LLC (as Co-Issuer), Meridian Atlantic Securities LLC (as Initial Purchaser and Placement Agent), and Northbridge Capital Markets Inc. (as Co-Placement Agent). Governs the purchase, sale, and distribution of the notes by the placement agents.

6. Co-Issuance Agreement — Dated as of August 22, 2023, between Driftwood CLO 2023-I, Ltd. (as Issuer) and Driftwood CLO 2023-I, LLC (as Co-Issuer). Governs the co-issuance of the rated notes by the Co-Issuer alongside the Issuer.

B. Offering Materials

7. Preliminary Offering Memorandum — Dated August 4, 2023. Distributed to prospective investors in connection with the marketing of the notes.

8. Final Offering Memorandum — Dated August 18, 2023. Finalized and distributed to investors in connection with the signing and pricing of the Transaction. Contains a comprehensive description of the Transaction, the capital structure, the collateral, the risk factors, and the terms of the notes.

C. Warehouse Take-Out Documents

9. Warehouse Payoff Letter — Dated September 12, 2023. Issued by Havenwood Bank, N.A., confirming the outstanding balance, accrued interest, and wire instructions for the full payoff of the Warehouse Facility.

10. Warehouse Facility Termination & Release Agreement — Dated September 12, 2023. Executed by Driftwood CLO 2023-I, Ltd. and Havenwood Bank, N.A. Terminated the Warehouse Facility and released all liens and security interests.

11. Assignment of Collateral from Warehouse to CLO Issuer — Dated September 12, 2023. Effected the transfer of collateral from the warehouse structure to the CLO Issuer and the pledge thereof to the Trustee under the Indenture.

D. Rating Agency Documents

12. Brindoval Rating Agency Presentation Deck — Dated June 12, 2023.

13. Ridgeline Rating Agency Presentation Deck — Dated June 19, 2023.

14. Brindoval Engagement Letter — Executed in connection with the engagement of Brindoval to rate the notes.

CONFIDENTIAL / ATTORNEY WORK PRODUCT / PRIVILEGED
CALDERWOOD & HARKNESS LLP 450 Park Avenue New York, New York 10022
POST-CLOSING SUMMARY MEMORANDUM
TO: Samuel Eklund, Responsible Partner Linda Osei, Billing Partner Sylvia Hartwell, Specialist Partner, Tax
FROM: Hannah Brinkley, Lead Associate Patrick Gallagher, Working Associate
DATE: September 22, 2023
RE: Post-Closing Summary — Driftwood CLO 2023-I ($400,000,000 Broadly Syndicated CLO)
MATTER NO.: 1024-00004
BILLING CODE: DARF-CLO-2023I
CLIENT: Driftwood Absolute Return Fund Ltd.
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I. Executive Summary
The purpose of this memorandum is to memorialize the successful closing and final settlement of the Driftwood CLO 2023-I transaction (the "Transaction"), a $400,000,000 broadly syndicated cash-flow collateralized loan obligation. This memorandum is intended to serve as the definitive internal record of the firm's representation in connection with this Transaction and to provide a comprehensive summary of the transaction structure, parties, documentation, timeline, and outstanding post-closing items for the engagement team's reference and for permanent filing in the matter file.
Calderwood & Harkness LLP ("C&H" or the "Firm") served as issuer's counsel to Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF") in connection with the structuring, warehouse take-out, indenture negotiation, rating-agency process, offering memorandum review, tax structuring, Cayman law coordination, and closing of the Transaction. Our representation encompassed all aspects of the Transaction from engagement inception through final settlement, including the negotiation of all principal transaction documents, coordination with multiple counterparties and their respective counsel, management of the dual-rating agency process, oversight of the warehouse facility take-out mechanics, and the preparation and delivery of all closing deliverables.
The Transaction involved the issuance of six tranches of notes — five rated tranches (Class A-1, Class A-2, Class B, Class C, and Class D) and one unrated equity tranche (Subordinated Notes) — backed by a portfolio of broadly syndicated first-lien senior secured leveraged loans with obligors primarily domiciled in the United States. The notes were offered and sold in reliance upon the exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), provided by Rule 144A and Regulation S thereunder.
The key milestones of the Transaction were as follows:
• Signing: August 22, 2023 — Execution and delivery of the Indenture, Collateral Management Agreement, Co-Issuance Agreement, Collateral Administration Agreement, and ancillary transaction documents.
• Pricing: September 8, 2023 — Final pricing of all note tranches; execution and delivery of the First Supplemental Indenture (reflecting final pricing spreads and CUSIPs), the Note Purchase Agreement, and receipt of rating confirmation letters from both rating agencies.
• Closing / Note Issuance: September 12, 2023 — Issuance of all notes; full repayment and take-out of the warehouse credit facility; delivery of all legal opinions, officer's and secretary's certificates, and other closing deliverables; assignment of collateral from the warehouse to the CLO Issuer and pledge to the Trustee.
• Final Settlement: September 20, 2023 — Final settlement of all note tranches through the facilities of The Depository Trust Company ("DTC").
The Transaction is now closed and completed. Certain post-closing compliance items remain outstanding, most notably the satisfaction of the Effective Date conditions set forth in the Indenture, which must be achieved by December 12, 2023 (90 days following the Pricing Date). These items are described in greater detail in Section XIV of this memorandum.
II. Transaction Parties
Set forth below is a comprehensive summary of all principal parties to the Transaction, including their respective roles, organizational details, and key contacts.
A. Issuer / Co-Issuer
Driftwood CLO 2023-I, Ltd. (the "Issuer") is an exempted company with limited liability organized under the laws of the Cayman Islands, registered with the Cayman Islands Registrar of Companies under Registration Number EX-382916. The Issuer was formed as a special purpose vehicle for the sole purpose of issuing the notes and acquiring, holding, and managing the collateral portfolio in connection with the Transaction. The Issuer's registered office is located at PO Box 4927, Windward House, 3rd Floor, George Town, Grand Cayman KY1-1306, Cayman Islands. The Issuer is the primary obligor on all tranches of notes issued in the Transaction.
Driftwood CLO 2023-I, LLC (the "Co-Issuer") is a limited liability company organized under the laws of the State of Delaware, filed with the Delaware Secretary of State under File Number 7429831. The Co-Issuer's registered agent is National Registered Agents Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. The Co-Issuer was formed as a co-issuer of the rated notes for the purpose of facilitating the offering and sale of the notes to U.S. investors in reliance upon the Rule 144A exemption. The Co-Issuer is classified as a disregarded entity for United States federal income tax purposes, as further described in Section XIII of this memorandum. The Co-Issuer's sole member is the Issuer, and it is governed by an LLC Agreement dated August 22, 2023.
B. Client / Sponsor
Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF") is an exempted company organized under the laws of the Cayman Islands and registered with the Cayman Islands Monetary Authority ("CIMA") under Registration Number MC-2017-02834. Driftwood's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131. As of the first quarter of 2023, Driftwood had approximately $6.8 billion in assets under management across multiple investment strategies, including credit, structured products, and event-driven investing.
Driftwood served as the sponsor of the Transaction and is the ultimate parent entity of the Collateral Manager. The key principals at Driftwood involved in the Transaction were:
• Marcus Sorensen — Founder and Chief Investment Officer
• Elena Voss — President and Chief Operating Officer
• David Hwan — Managing Director, Structured Credit; portfolio manager for the CLO platform and the individual primarily responsible for day-to-day management of the collateral portfolio
C. Collateral Manager
Driftwood Credit Management LLC ("DCM" or the "Collateral Manager") is a limited liability company organized under the laws of the State of Delaware. DCM is a registered investment adviser with the U.S. Securities and Exchange Commission (CRD Number 182447) and is a wholly owned subsidiary of Driftwood. DCM is responsible for the selection, acquisition, and ongoing management of the collateral pool, including all trading activity during the Reinvestment Period. DCM's rights and obligations are governed by the Collateral Management Agreement dated August 22, 2023 between the Issuer and DCM. The fee structure applicable to DCM is set forth in Section VII of this memorandum.
D. Structuring Lead / Placement Agents
Meridian Atlantic Securities LLC ("Meridian Atlantic") served as lead structuring agent and initial purchaser/placement agent for the Transaction. Meridian Atlantic is a registered broker-dealer (SEC CRD Number 39821) with offices at 383 Madison Avenue, 22nd Floor, New York, New York 10179. Meridian Atlantic was responsible for structuring the capital stack, coordinating the marketing and distribution of the rated notes, and facilitating the pricing process. The key contacts at Meridian Atlantic were:
• Jonathan Halevy — Managing Director, CLO Structuring
• Priya Ramanathan — Director, CLO Distribution
Northbridge Capital Markets Inc. ("Northbridge") served as co-placement agent for the Transaction, with primary responsibility for the distribution of the Subordinated Notes. Northbridge's offices are located at 1251 Avenue of the Americas, 34th Floor, New York, New York 10020. The key contact at Northbridge was:
• Raymond Cho — Senior Vice President, Structured Credit Sales
E. Trustee / Collateral Administrator / Paying Agent / Registrar / Custodian
Ironclad Trust Company, N.A. ("Ironclad Trust" or the "Trustee") is a national banking association organized and existing under the laws of the United States, with offices at 100 Wall Street, Suite 1650, New York, New York 10005. Ironclad Trust serves in multiple capacities under the Transaction, including as Trustee under the Indenture, Collateral Administrator under the Collateral Administration Agreement, Paying Agent, Registrar, Transfer Agent, and Custodian. Ironclad Trust's DTC Participant Number is 2176. The key contact at Ironclad Trust was:
• Catherine Nowak — Vice President, Corporate Trust
F. Warehouse Lender / Account Bank
Havenwood Bank, N.A. ("Havenwood Bank") is a national banking association organized and existing under the laws of the United States, with offices at 227 West Monroe Street, Chicago, Illinois 60606. Havenwood Bank provided the warehouse credit facility that was used to fund the initial acquisition of collateral during the warehouse ramp period prior to the CLO closing. Havenwood Bank also serves as account bank for certain transaction accounts. The key contact at Havenwood Bank was:
• Thomas Eriksen — Managing Director, Structured Finance Lending
G. Rating Agencies
Brindoval Analytical Services Inc. ("Brindoval" or "CAS") is a nationally recognized statistical rating organization ("NRSRO") registered with the SEC, with offices at 55 Water Street, 40th Floor, New York, New York 10041. Brindoval assigned ratings to each of the rated note tranches. The key contacts at Brindoval were:
• Anita Delgado — Senior Director
• Brian Whitford — Lead Analyst
Ridgeline Credit Ratings LLC ("Ridgeline" or "RCR") is a nationally recognized statistical rating organization registered with the SEC, with offices at 7 World Trade Center, 30th Floor, New York, New York 10007. Ridgeline assigned ratings to each of the rated note tranches. The key contact at Ridgeline was:
• Kenji Matsuda — Director, CLO Ratings
H. Counsel. The following law firms served in their respective capacities in connection with the Transaction:
Calderwood & Harkness LLP — Issuer's Counsel. 450 Park Avenue, New York, New York 10022. The C&H engagement team consisted of the following professionals:
• Samuel Eklund — Responsible Partner
• Linda Osei — Billing Partner
• Hannah Brinkley — Lead Associate
• Patrick Gallagher — Working Associate
• Sylvia Hartwell — Specialist Partner, Tax
Barrington, Locke & Hayes LLP — Placement Agent's Counsel. 601 Lexington Avenue, New York, New York 10022. The principal contacts were:
• Gregory Fontaine — Partner
• Miriam Saldaña — Associate
Ashworth & Pratt LLP — Trustee's Counsel. One Liberty Plaza, 46th Floor, New York, New York 10006. The principal contact was:
• Lillian Marchetti — Partner
Kenton & Caldwell LLP — Warehouse Lender's Counsel. 200 Park Avenue, New York, New York 10166. The principal contact was:
• Victor Salazar — Partner
Applegategate Offshore Services Ltd. — Cayman Counsel. Windward House, 4th Floor, George Town, Grand Cayman KY1-1306, Cayman Islands. The principal contact was:
• Nigel Pemberton — Partner
I. Independent Auditors
Greystone Audit Partners LLP — 345 Hudson Street, New York, New York 10014. Greystone was engaged by the Issuer and the Collateral Manager for audit and reporting purposes in connection with the Transaction on an ongoing basis.
J. Key Investors / Anchor Noteholders
The following institutional investors participated as anchor or significant noteholders in the Transaction. This information is provided for internal reference purposes only and is subject to the confidentiality obligations set forth in the Note Purchase Agreement and applicable side letters.
Marlowe Asset Management Peak Institutional Credit Fund LP — Anchor investor in the Class A-1 Notes with an initial allocation of approximately $80,000,000 in principal amount. The key contact was:
• Robert Calloway — Portfolio Manager
Blackpine Insurance Holdings Ltd. — Investor in the Class A-2 Notes and Class B Notes with a combined initial allocation of approximately $45,000,000 in principal amount. The key contact was:
• Sarah Liang — Chief Investment Officer
Stonehill Public Employees' Retirement System — Investor in the Class C Notes and Class D Notes with a combined initial allocation of approximately $22,000,000 in principal amount. The key contact was:
• James Whitaker — Director of Fixed Income
III. Transaction Timeline
The following table sets forth a comprehensive chronological summary of the principal milestones and events in the Transaction from engagement inception through final settlement.
IV. Final Capital Structure
A. Summary Table
The final capital structure of Driftwood CLO 2023-I is set forth in the table below. All notes were issued on the Closing Date (September 12, 2023) and settled through DTC on the Final Settlement Date (September 20, 2023).
Additional security identifiers are as follows:
• Class A-1 Notes (Regulation S): CUSIP G2694LAA7
• Class A-1 Notes (144A): ISIN US26738TAA51
The total principal amount of rated notes is $364,000,000. The total principal amount of unrated subordinated equity is $36,000,000. The reference spread for the Transaction, as determined by the placement agent and set forth in the Note Purchase Agreement, is 190 basis points (corresponding to the Class A-2 tranche). The weighted average rated-note spread is approximately 195.49 basis points, computed as the aggregate of (individual tranche spread × individual tranche principal amount) for all rated tranches, divided by total rated note principal (i.e., 71,160 ÷ 364.00 ≈ 195.49 bps).
B. Key Structural Terms
The following summarizes the key structural terms applicable to the notes as set forth in the Indenture and the First Supplemental Indenture:
• Reference Rate: Compounded SOFR, determined in accordance with the SOFR compounding methodology set forth in the Indenture, with a 26253 fallback convention (as defined in the Indenture) applicable in the event that SOFR is unavailable or discontinued.
• Day Count Convention: Actual/360 for all tranches.
• Minimum Denomination (Rated Notes): $250,000 in initial principal amount, with increments of $1,000 in excess thereof.
• Minimum Denomination (Subordinated Notes): $250,000 in initial principal amount, with increments of $1 in excess thereof.
• Offering Exemption: All notes were offered and sold in reliance upon Rule 144A and Regulation S under the Securities Act of 1933, as amended.
• Payment Date Frequency: Quarterly, occurring on the 15th day of January, April, July, and October of each year (or, if such day is not a Business Day, the next succeeding Business Day).
• Record Date: The 15th calendar day preceding each Payment Date (or, if such day is not a Business Day, the immediately preceding Business Day).
• First Payment Date: January 15, 2024.
C. Subordination Levels
The credit enhancement provided by subordination for each rated tranche, expressed as a percentage of the total capital structure, is as follows:
These subordination levels were established in consultation with both Brindoval and Ridgeline during the structuring process and are consistent with the subordination levels required by each agency's respective CLO rating methodology to achieve the assigned ratings.
D. Key Dates
The following key dates govern the lifecycle of the Transaction:
• Non-Call Period: Two years from the Closing Date. The Non-Call Period expires on September 12, 2025. During the Non-Call Period, the notes may not be redeemed or refinanced at the option of the Issuer or the holders of the Subordinated Notes.
• Reinvestment Period: Five years from the Closing Date. The Reinvestment Period expires on September 12, 2028. During the Reinvestment Period, DCM as Collateral Manager may reinvest principal proceeds received on the collateral portfolio into new eligible collateral obligations, subject to the portfolio quality tests and trading constraints set forth in the Indenture.
• Stated Maturity: October 15, 2036. All outstanding notes mature and become due and payable on the Stated Maturity, subject to earlier redemption or acceleration in accordance with the terms of the Indenture.
V. Collateral Pool and Eligibility Criteria
The collateral pool underlying the Transaction consists of broadly syndicated first-lien senior secured leveraged loans, with obligors primarily domiciled in the United States. The target portfolio par amount is $400,000,000. As of the Closing Date, the portfolio was approximately 85% ramped, with the remaining collateral to be acquired by DCM during the post-closing ramp period. The Effective Date Deadline, by which the portfolio must be fully ramped and all collateral quality tests must be satisfied, is December 12, 2023 (90 days following the Pricing Date of September 8, 2023).
A. Key Collateral Quality Tests (per Indenture)
The Indenture establishes the following collateral quality tests, which must be satisfied as of the Effective Date and, on an ongoing basis, in connection with each reinvestment trade during the Reinvestment Period:
These collateral quality tests reflect the parameters agreed upon with both Brindoval and Ridgeline during the rating agency process and are incorporated in the Indenture as conditions to reinvestment trading and Effective Date compliance.
B. Coverage Tests
The Indenture establishes overcollateralization ("O/C") tests and interest coverage ("I/C") tests that are calculated on each Determination Date (occurring prior to each Payment Date). Failure to satisfy any O/C or I/C test triggers a diversion of cash flows in the priority of payments waterfall to cure the applicable test.
Overcollateralization Tests:
Interest Coverage Tests:
VI. Warehouse Facility Take-Out
The warehouse credit facility played a central role in the Transaction by providing the Issuer with interim financing to acquire collateral during the pre-closing ramp period. Set forth below is a comprehensive summary of the warehouse facility and its take-out at closing.
Warehouse Facility Terms. On May 22, 2023, Driftwood CLO 2023-I, Ltd. (as borrower) and Havenwood Bank, N.A. (as lender) executed a $250,000,000 revolving credit facility (the "Warehouse Facility"). The Warehouse Facility provided for advances at a rate of 85% of eligible collateral par, bearing interest at SOFR plus 150 basis points. The Warehouse Facility was documented by Kenton & Caldwell LLP, counsel to Havenwood Bank (Victor Salazar, Partner).
Ramp Period. The warehouse ramp commenced on May 25, 2023, at which time DCM began acquiring eligible broadly syndicated loans under the Warehouse Facility. By August 15, 2023, the warehouse portfolio was approximately 85% ramped toward the target par amount of $400,000,000. DCM continued to selectively acquire additional collateral during the period between signing and closing.
Outstanding Balance at Take-Out. As of the Closing Date (September 12, 2023), the outstanding principal balance under the Warehouse Facility was $212,500,000.
Take-Out Mechanics. On the Closing Date, the Warehouse Facility was repaid in full from the proceeds of the CLO note issuance. The take-out was effectuated through the following sequence of transactions and documents:
1. Warehouse Payoff Letter — Dated September 12, 2023, issued by Havenwood Bank, N.A. The payoff letter confirmed the total outstanding balance, accrued and unpaid interest, any applicable breakage costs, and wire instructions for the payoff amount.
2. Warehouse Facility Termination & Release Agreement — Dated September 12, 2023, executed by Driftwood CLO 2023-I, Ltd. and Havenwood Bank, N.A. This agreement formally terminated the Warehouse Facility in its entirety and released all liens, security interests, and encumbrances held by Havenwood Bank on the collateral portfolio and related assets.
3. Assignment of Collateral — Dated September 12, 2023, pursuant to which the collateral held under the Warehouse Facility was transferred and assigned from the warehouse structure to Driftwood CLO 2023-I, Ltd. (the CLO Issuer) and simultaneously pledged to Ironclad Trust Company, N.A. under the terms of the Indenture.
Havenwood Bank's counsel, Kenton & Caldwell LLP (Victor Salazar), coordinated closely with C&H on the preparation and execution of all termination and release documentation. All wire transfers related to the warehouse take-out were executed on the Closing Date in accordance with the Closing Funds Flow Memorandum, and Havenwood Bank confirmed receipt of the payoff amount in full on September 12, 2023.
VII. Fee Structure Summary
The following table summarizes the fee arrangements applicable to the principal service providers in the Transaction, as set forth in the applicable transaction documents:
The aggregate collateral management fees (senior and subordinate combined) total 0.50% per annum on aggregate collateral par, or $2,000,000 per year at full target par. The subordinate management fee and the incentive management fee are both subordinate in the waterfall to the payment of interest on all rated note tranches and certain senior administrative expenses, providing structural protection to rated noteholders.
VIII. Closing Funds Flow Summary
The Closing Funds Flow Memorandum, dated September 12, 2023, was prepared by C&H and approved by all transaction parties prior to closing. The memorandum set forth the sources and uses of funds on the Closing Date, together with wire instructions for all counterparties. A summary of the sources and uses is set forth below.
A. Sources of Funds
The total sources of funds on the Closing Date were $400,000,000, consisting of the aggregate proceeds of all note tranches:
B. Uses of Funds
The proceeds of the note issuance were applied on the Closing Date as follows:
The Closing Funds Flow Memorandum, dated September 12, 2023, included detailed wire instructions for all counterparties, account numbers, ABA routing numbers, and reference information for each wire transfer. All wires were initiated on the Closing Date and confirmed as received by all counterparties. The Funds Flow Memorandum is cross-referenced as Appendix D to this memorandum.
IX. Ratings Process Summary
The notes are dual-rated by Brindoval Analytical Services Inc. ("Brindoval" or "CAS") and Ridgeline Credit Ratings LLC ("Ridgeline" or "RCR"), both nationally recognized statistical rating organizations registered with the SEC. The following is a chronological summary of the ratings process:
Rating Agency Presentations. On June 12, 2023, the C&H team, together with DCM (David Hwan) and Meridian Atlantic (Jonathan Halevy), delivered the initial rating agency presentation to Brindoval (Anita Delgado, Senior Director, and Brian Whitford, Lead Analyst). The presentation covered the Driftwood platform overview, the track record of the structured credit team, the portfolio construction criteria, the proposed capital structure and subordination levels, and the collateral eligibility criteria. On June 19, 2023, a substantively similar presentation was delivered to Ridgeline (Kenji Matsuda, Director, CLO Ratings), supplemented with additional analytics and cash flow modeling tailored to Ridgeline's proprietary rating methodology.
Model Review. Following the presentations, both rating agencies conducted extensive independent model reviews and cash flow analyses of the proposed transaction structure. The rating agency model review process was completed by July 28, 2023. During this period, C&H coordinated multiple rounds of follow-up questions and data requests between the rating agencies and DCM.
Preliminary Ratings. On August 4, 2023, both Brindoval and Ridgeline issued preliminary ratings for all five rated note tranches. These preliminary ratings were consistent with the final ratings ultimately assigned and provided the basis for the distribution of the Preliminary Offering Memorandum to prospective investors.
Final Rating Confirmations. On September 8, 2023 (the Pricing Date), both Brindoval and Ridgeline delivered final rating confirmation letters confirming the ratings for each rated tranche in the amounts and at the spreads set forth in the First Supplemental Indenture. The final confirmed ratings are as follows:
The Subordinated Notes are unrated. Rating agency engagement letters were executed with both Brindoval and Ridgeline at the outset of the ratings process and are included in the closing binder as part of the rating agency documentation package.
X. Legal Opinions Delivered at Closing
All legal opinions described below were delivered on September 12, 2023 (the Closing Date) as conditions to closing under the Indenture and the Note Purchase Agreement. Each opinion was delivered in customary form and subject to customary qualifications, assumptions, and exceptions.
1. U.S. Legal Opinion — Calderwood & Harkness LLP. Addressed to Ironclad Trust Company, N.A. (as Trustee) and Meridian Atlantic Securities LLC (as Placement Agent). This opinion addressed the following matters:
(a) Due organization, valid existence, and good standing of Driftwood CLO 2023-I, LLC (the Co-Issuer) under the laws of the State of Delaware;
(b) Due authorization, execution, and delivery by the Co-Issuer of the Indenture, the First Supplemental Indenture, the Co-Issuance Agreement, and the notes;
(c) Enforceability of the Indenture, the First Supplemental Indenture, and the notes against the Co-Issuer in accordance with their respective terms, subject to customary bankruptcy, insolvency, and equitable principles exceptions;
(d) Valid issuance of the notes in accordance with the terms of the Indenture;
(e) No violation of, or conflict with, the Co-Issuer's certificate of formation or LLC agreement, or any applicable federal or New York law or regulation, as a result of the execution and delivery of the transaction documents;
(f) Exemption of the Issuer from registration as an "investment company" under the Investment Company Act of 1940, as amended, pursuant to Rule 3a-7 thereunder; and
(g) No requirement for the Issuer to register as an "investment company" under the Investment Company Act upon completion of the Transaction.
2. Tax Opinion — Calderwood & Harkness LLP (Sylvia Hartwell). Addressed to Driftwood CLO 2023-I, Ltd. (the Issuer) and Ironclad Trust Company, N.A. (as Trustee). This opinion addressed the following matters:
(a) The Issuer will not be treated as engaged in a trade or business within the United States for purposes of the Internal Revenue Code of 1986, as amended (the "Code"), and accordingly will not be subject to U.S. federal income tax on a net income basis;
(b) Driftwood CLO 2023-I, LLC (the Co-Issuer) will be treated as a disregarded entity for U.S. federal income tax purposes, separate from its sole owner (the Issuer); and
(c) The rated notes (Classes A-1 through D) will be treated as debt for U.S. federal income tax purposes, while the Subordinated Notes will be treated as equity interests in the Issuer for U.S. federal income tax purposes.
3. Cayman Legal Opinion — Applegategate Offshore Services Ltd. (Nigel Pemberton). Addressed to Ironclad Trust Company, N.A. (as Trustee) and Meridian Atlantic Securities LLC (as Placement Agent). This opinion addressed the following matters:
(a) Due incorporation and valid existence of the Issuer as an exempted company with limited liability under the laws of the Cayman Islands;
(b) Good standing of the Issuer with the Cayman Islands Registrar of Companies;
(c) Corporate power and authority of the Issuer to enter into and perform its obligations under the transaction documents;
(d) Enforceability of the Indenture, the notes, and other transaction documents against the Issuer under the laws of the Cayman Islands (subject to customary qualifications); and
(e) Confirmation that, under current Cayman Islands law, no taxes are imposed on the Issuer in the Cayman Islands on income, profits, capital gains, or other amounts, and that the Issuer has obtained a tax undertaking from the Governor in Cabinet of the Cayman Islands.
4. Trustee's Counsel Opinion — Ashworth & Pratt LLP (Lillian Marchetti). Addressed to the Issuer, the Co-Issuer, and Meridian Atlantic Securities LLC. This opinion addressed:
(a) Due organization and valid existence of Ironclad Trust Company, N.A. as a national banking association under the laws of the United States;
(b) Corporate power and authority of Ironclad Trust to enter into and perform its obligations under the Indenture and ancillary documents; and
(c) Due authorization, execution, and delivery of the Indenture, the Collateral Administration Agreement, and related documents by Ironclad Trust.
XI. Closing Certificates and Corporate Authorizations
The following certificates and corporate authorization documents were delivered at or prior to closing, as conditions to closing under the Indenture and the Note Purchase Agreement:
1. Officer's Certificate of the Issuer. Dated September 12, 2023, executed by an authorized officer of Driftwood CLO 2023-I, Ltd. The Officer's Certificate certified the following:
(a) All conditions precedent to the issuance of the notes under the Indenture and the Note Purchase Agreement had been satisfied or waived;
(b) All representations and warranties of the Issuer contained in the Indenture, the Note Purchase Agreement, and each other transaction document were true and correct in all material respects as of the Closing Date;
(c) No Event of Default or Default had occurred and was continuing under the Indenture as of the Closing Date; and
(d) The collateral portfolio complied with all applicable collateral quality tests set forth in the Indenture as of the Closing Date (subject to the post-closing ramp and Effective Date compliance requirements).
2. Secretary's Certificate of the Issuer. Dated September 12, 2023, executed by an authorized officer of Driftwood CLO 2023-I, Ltd. The Secretary's Certificate certified the following:
(a) The incumbency and specimen signatures of each authorized signatory of the Issuer authorized to execute and deliver the transaction documents;
(b) Attached as exhibits the board resolutions of the Issuer authorizing the Transaction (described below); and
(c) Attached as an exhibit the Memorandum and Articles of Association of the Issuer, certified as being true, complete, and correct as of the Closing Date.
3. Board Resolutions — Driftwood CLO 2023-I, Ltd. Written resolutions of the board of directors of the Issuer, dated August 20, 2023, unanimously authorizing the execution and delivery of the Indenture, the First Supplemental Indenture, the Collateral Management Agreement, the Co-Issuance Agreement, the Note Purchase Agreement, and each other transaction document to which the Issuer is a party, and the issuance of all tranches of notes.
4. Board Resolutions (Sole Member Consent) — Driftwood CLO 2023-I, LLC. Written consent of the sole member (Driftwood CLO 2023-I, Ltd.) of the Co-Issuer, dated August 20, 2023, authorizing the execution and delivery of the Indenture, the First Supplemental Indenture, and the Co-Issuance Agreement by the Co-Issuer in its capacity as co-issuer of the rated notes.
Additional corporate formation documents included in the closing binder are the Certificate of Formation of the Co-Issuer (filed with the Delaware Secretary of State), the Memorandum and Articles of Association of the Issuer (filed with the Cayman Islands Registrar of Companies under Registration Number EX-382916), and the LLC Agreement of the Co-Issuer dated August 22, 2023.
XII. Transaction Documents Summary
Set forth below is a comprehensive index of all transaction documents executed and delivered in connection with the Transaction. All documents are included in the closing binder, which is being assembled by the C&H engagement team as described in Section XIV below.
A. Core Transaction Documents
All of the following documents have been fully executed and delivered:
1. Indenture — Dated as of August 22, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood CLO 2023-I, LLC (as Co-Issuer), and Ironclad Trust Company, N.A. (as Trustee). Governs the issuance of the notes, the priority of payments, the collateral quality tests, the coverage tests, and the rights and obligations of the Issuer, the Co-Issuer, and the Trustee.
2. First Supplemental Indenture — Dated as of September 8, 2023, among the Issuer, the Co-Issuer, and the Trustee. Supplements the Indenture to reflect final pricing spreads, CUSIPs, ISINs, and other terms finalized at pricing.
3. Collateral Management Agreement — Dated as of August 22, 2023, between Driftwood CLO 2023-I, Ltd. (as Issuer) and Driftwood Credit Management LLC (as Collateral Manager). Governs the appointment, rights, duties, and compensation of DCM as collateral manager.
4. Collateral Administration Agreement — Dated as of August 22, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood Credit Management LLC (as Collateral Manager), and Ironclad Trust Company, N.A. (as Collateral Administrator). Governs the collateral administration and reporting functions performed by Ironclad Trust.
5. Note Purchase Agreement — Dated as of September 8, 2023, among Driftwood CLO 2023-I, Ltd. (as Issuer), Driftwood CLO 2023-I, LLC (as Co-Issuer), Meridian Atlantic Securities LLC (as Initial Purchaser and Placement Agent), and Northbridge Capital Markets Inc. (as Co-Placement Agent). Governs the purchase, sale, and distribution of the notes by the placement agents.
6. Co-Issuance Agreement — Dated as of August 22, 2023, between Driftwood CLO 2023-I, Ltd. (as Issuer) and Driftwood CLO 2023-I, LLC (as Co-Issuer). Governs the co-issuance of the rated notes by the Co-Issuer alongside the Issuer.
B. Offering Materials
7. Preliminary Offering Memorandum — Dated August 4, 2023. Distributed to prospective investors in connection with the marketing of the notes.
8. Final Offering Memorandum — Dated August 18, 2023. Finalized and distributed to investors in connection with the signing and pricing of the Transaction. Contains a comprehensive description of the Transaction, the capital structure, the collateral, the risk factors, and the terms of the notes.
C. Warehouse Take-Out Documents
9. Warehouse Payoff Letter — Dated September 12, 2023. Issued by Havenwood Bank, N.A., confirming the outstanding balance, accrued interest, and wire instructions for the full payoff of the Warehouse Facility.
10. Warehouse Facility Termination & Release Agreement — Dated September 12, 2023. Executed by Driftwood CLO 2023-I, Ltd. and Havenwood Bank, N.A. Terminated the Warehouse Facility and released all liens and security interests.
11. Assignment of Collateral from Warehouse to CLO Issuer — Dated September 12, 2023. Effected the transfer of collateral from the warehouse structure to the CLO Issuer and the pledge thereof to the Trustee under the Indenture.
D. Rating Agency Documents
12. Brindoval Rating Agency Presentation Deck — Dated June 12, 2023.
13. Ridgeline Rating Agency Presentation Deck — Dated June 19, 2023.
14. Brindoval Engagement Letter — Executed in connection with the engagement of Brindoval to rate the notes.
15. Ridgeline Engagement Letter — Executed in connection with the engagement of Ridgeline to rate the notes.
16. Brindoval Rating Confirmation Letter — Dated September 8, 2023. Confirmed the final ratings assigned to each rated tranche.
17. Ridgeline Rating Confirmation Letter — Dated September 8, 2023. Confirmed the final ratings assigned to each rated tranche.
E. Legal Opinions
18. U.S. Legal Opinion — Calderwood & Harkness LLP (September 12, 2023)
19. Tax Opinion — Calderwood & Harkness LLP, Sylvia Hartwell (September 12, 2023)
20. Cayman Legal Opinion — Applegategate Offshore Services Ltd., Nigel Pemberton (September 12, 2023)
21. Trustee's Counsel Opinion — Ashworth & Pratt LLP, Lillian Marchetti (September 12, 2023)
As described in further detail in Section X of this memorandum.
F. Closing Certificates and Corporate Formation Documents
22. Officer's Certificate of the Issuer (September 12, 2023)
23. Secretary's Certificate of the Issuer (September 12, 2023)
24. Board Resolutions — Driftwood CLO 2023-I, Ltd. (August 20, 2023)
25. Board Resolutions (Sole Member Consent) — Driftwood CLO 2023-I, LLC (August 20, 2023)
26. Certificate of Formation — Driftwood CLO 2023-I, LLC (filed with the Delaware Secretary of State; DE File No. 7429831)
27. Certificate of Good Standing — Driftwood CLO 2023-I, LLC (issued by the Delaware Secretary of State)
28. Memorandum and Articles of Association — Driftwood CLO 2023-I, Ltd. (Cayman Islands Registrar of Companies; Registration No. EX-382916)
29. Certificate of Good Standing — Driftwood CLO 2023-I, Ltd. (issued by the Cayman Islands Registrar of Companies)
30. LLC Agreement — Driftwood CLO 2023-I, LLC (dated August 22, 2023)
As described in further detail in Section XI of this memorandum.
G. Closing Administrative Documents
• Closing Funds Flow Memorandum — Dated September 12, 2023. Prepared by Calderwood & Harkness LLP. Sets forth the sources and uses of funds on the Closing Date, together with wire instructions for all counterparties.
• Master Closing Checklist — Dated September 20, 2023. Compiled by Calderwood & Harkness LLP. Comprehensive checklist of all closing deliverables, confirming receipt and completeness of all items.
XIII. Tax Structuring Summary
The tax structure of the Transaction was designed to ensure efficient treatment for the Issuer, the Co-Issuer, and the investors in the notes. The following summarizes the key tax structuring elements, which were addressed in detail in the Tax Opinion delivered by C&H (Sylvia Hartwell) at closing.
Cayman Issuer — Driftwood CLO 2023-I, Ltd. The Issuer is organized as an exempted company under the laws of the Cayman Islands. Under current Cayman Islands law, the Issuer is not subject to any income tax, corporate tax, capital gains tax, withholding tax, or other tax in the Cayman Islands. The Issuer has obtained a tax undertaking from the Governor in Cabinet of the Cayman Islands pursuant to the Tax Concessions Act (as revised) of the Cayman Islands, providing assurance that no such taxes will be imposed for a period of twenty years from the date of the undertaking. The Issuer has been structured to avoid being treated as engaged in a trade or business within the United States for purposes of the Code, relying on the safe harbor provided by Section 864(b)(2) of the Code and the regulations thereunder for trading in stocks and securities for the account of the Issuer by an independent agent.
Delaware Co-Issuer — Driftwood CLO 2023-I, LLC. The Co-Issuer is a Delaware limited liability company that has elected, by default, to be classified as a disregarded entity for U.S. federal income tax purposes. As a disregarded entity, the Co-Issuer is treated as a division or branch of its sole owner (the Issuer) rather than as a separate taxable entity. This classification avoids the imposition of U.S. federal income tax at the Co-Issuer level.
Rated Notes (Classes A-1 through D). The rated notes are treated as debt obligations of the Issuer for U.S. federal income tax purposes. Interest paid on the rated notes is intended to constitute "portfolio interest" exempt from U.S. federal withholding tax under Sections 871(h) and 881(c) of the Code, provided the holders thereof satisfy the applicable certification requirements (generally, the delivery of IRS Form W-8BEN or W-8BEN-E by non-U.S. holders or IRS Form W-9 by U.S. holders).
Subordinated Notes. The Subordinated Notes are treated as equity interests in the Issuer for U.S. federal income tax purposes. Holders of the Subordinated Notes are treated as owning a proportionate interest in the assets and liabilities of the Issuer and are required to include their allocable share of the Issuer's income, gains, losses, and deductions in computing their own U.S. federal income tax liability. Holders of the Subordinated Notes will receive Schedule K-1 equivalent reporting from the Issuer (or its administrative agent) for each taxable year.
FATCA/CRS. The Issuer has been registered as a Reporting Foreign Financial Institution with the Cayman Tax Information Authority for purposes of the Foreign Account Tax Compliance Act ("FATCA") and the Common Reporting Standard ("CRS"). The Issuer will comply with all applicable FATCA and CRS reporting obligations, including the filing of annual reports with the Cayman Tax Information Authority identifying U.S. and reportable account holders.
ERISA. The rated notes (Classes A-1 through D) are eligible for purchase by employee benefit plans and other "benefit plan investors" (as defined in Section 3(42) of ERISA) in reliance upon the VCOC/REOC exemption and the underwriter's exemption set forth in PTCE 96-23, PTCE 91-38, PTCE 84-14, and Section 408(b)(17) of ERISA. The Subordinated Notes are restricted to non-benefit plan investors. The Offering Memorandum contains a detailed discussion of these ERISA eligibility considerations and the related transfer restrictions applicable to each tranche.
XIV. Outstanding Post-Closing Items
While the Transaction has been successfully closed and settled, the following post-closing items remain outstanding and require attention from the engagement team and the client.
A. Effective Date Compliance
The Issuer must satisfy the Effective Date conditions set forth in Article 3 of the Indenture by December 12, 2023 (the "Effective Date Deadline"), which is 90 days following the Pricing Date of September 8, 2023. Satisfaction of the Effective Date conditions requires compliance with each of the following:
(i) The collateral portfolio must be ramped to the target par amount of $400,000,000;
(ii) All collateral quality tests must be satisfied, including the minimum weighted average spread of 350 basis points, the minimum diversity score of 60, the maximum CCC bucket of 7.5% of aggregate collateral par, the maximum second-lien bucket of 5.0%, the maximum fixed-rate bucket of 10.0%, the minimum weighted average recovery rate of 45.0%, and the minimum WARF of 2,850;
(iii) All overcollateralization tests and interest coverage tests must be satisfied at the levels set forth in Section V.B of this memorandum; and
(iv) Confirmation must be obtained from both Brindoval and Ridgeline that the ratings assigned to the rated notes are not adversely affected as a result of the composition of the collateral portfolio as of the Effective Date.
David Hwan of DCM is responsible for completing the portfolio ramp and ensuring compliance with all collateral quality tests by the Effective Date Deadline. C&H is to coordinate with Ironclad Trust (Catherine Nowak) on the preparation and delivery of the Effective Date compliance certificate to both rating agencies and the Trustee.
If the Effective Date conditions are not satisfied by December 12, 2023, the Indenture provides for certain remedies, including a mandatory redemption of the notes (in whole or in part) from the proceeds of a liquidation of the collateral portfolio. We do not anticipate any difficulty in achieving Effective Date compliance within the prescribed timeframe based on the current status of the portfolio ramp.
B. Post-Closing Document Assembly
Hannah Brinkley and Patrick Gallagher are responsible for assembling the final closing binder, which will contain executed originals (or certified copies) of all transaction documents, legal opinions, certificates, corporate formation documents, rating agency correspondence, and closing administrative documents. The closing binder will be organized in accordance with the Master Closing Checklist dated September 20, 2023.
The target completion date for assembly and distribution of the closing binder is October 15, 2023. Copies of the closing binder will be distributed to the client (Driftwood / DCM), the Trustee (Ironclad Trust), and the placement agents (Meridian Atlantic and Northbridge), with a permanent copy retained in the C&H matter file.
C. Ongoing Compliance Monitoring
Although C&H's active role in the Transaction will wind down upon Effective Date certification (absent a request from the client for ongoing advisory services), the following compliance monitoring activities will occur on a recurring basis for the duration of the Transaction:
• Quarterly Trustee Reports: Ironclad Trust, as Trustee and Collateral Administrator, will prepare and distribute quarterly trustee reports to all noteholders and the Collateral Manager, commencing with the First Payment Date of January 15, 2024. These reports will include detailed information regarding the collateral portfolio, payment waterfall calculations, and coverage test compliance.
• Monthly Compliance Reports: Ironclad Trust, as Collateral Administrator, will calculate and distribute monthly compliance reports and coverage test results to the Collateral Manager and other specified parties in accordance with the Collateral Administration Agreement.
• Ongoing Portfolio Trading: DCM, as Collateral Manager, is responsible for ongoing portfolio trading (including reinvestment of principal proceeds, credit risk and credit-improved sales, and discretionary trading) within the constraints of the Indenture during the Reinvestment Period, which extends through September 12, 2028.
XV. Calderwood & Harkness Engagement Team and Billing
The following information summarizes the C&H engagement team and billing details for the Driftwood CLO 2023-I matter:
Matter Number: 1024-00004
Billing Code: DARF-CLO-2023I
The engagement is governed by the engagement letter dated May 15, 2023, between Calderwood & Harkness LLP and Driftwood Absolute Return Fund Ltd., which is governed by New York law. All fees and expenses incurred by C&H in connection with the Transaction are payable by the client in accordance with the terms of the engagement letter. Final billing for the Transaction should be completed promptly following the distribution of the closing binder and, if applicable, the Effective Date certification.
XVI. Conclusion
The Driftwood CLO 2023-I transaction has been successfully closed and settled. All six tranches of notes — totaling $400,000,000 in aggregate principal amount — have been duly issued by the Issuer and the Co-Issuer and have cleared through DTC as of the Final Settlement Date of September 20, 2023.
The warehouse credit facility provided by Havenwood Bank, N.A. has been fully taken out and terminated, and all collateral previously held under the warehouse has been assigned to the CLO Issuer and pledged to the Trustee under the Indenture.
All closing deliverables — including all executed transaction documents, legal opinions, certificates, corporate formation documents, and administrative closing documents — have been confirmed as received and complete per the Master Closing Checklist dated September 20, 2023.
The primary remaining action item is the satisfaction of the Effective Date conditions by December 12, 2023, as described in Section XIV.A of this memorandum. DCM (David Hwan) is actively managing the portfolio ramp, and we anticipate that Effective Date compliance will be achieved well within the prescribed 90-day window.
C&H's active role in the matter will wind down upon the delivery of the Effective Date compliance certificate, unless the client requests ongoing advisory services in connection with the Transaction. The engagement team should continue to monitor the matter for any post-closing issues or inquiries from the client, the Trustee, or the rating agencies during the interim period.
This memorandum should be filed in the permanent matter file under Matter No. 1024-00004 and circulated to all members of the engagement team for review and comment. Any corrections or additions should be directed to Hannah Brinkley or Patrick Gallagher.
Appendices (Referenced)
The following appendices are incorporated by reference into this memorandum and are maintained as separate files within the matter file:
Appendix A: Final Capital Structure and CUSIP Table — A detailed table of the final capital structure, including all CUSIPs, ISINs, subordination levels, pricing spreads, and ratings, as set forth in Section IV of this memorandum.
Appendix B: Transaction Timeline — A comprehensive chronological timeline of all Transaction milestones and events, as set forth in Section III of this memorandum.
Appendix C: Closing Checklist — Cross-reference to the Master Closing Checklist maintained in the matter file (filename: closing-checklist.xlsx, dated September 20, 2023). The closing checklist provides a line-item index of all closing deliverables, confirmation of receipt, responsible parties, and document status.
Appendix D: Funds Flow Memorandum — Cross-reference to the Closing Funds Flow Memorandum maintained in the matter file (filename: closing-funds-flow-memorandum.xlsx, dated September 12, 2023). The funds flow memorandum sets forth all sources and uses of funds on the Closing Date, together with wire instructions for all counterparties.
This memorandum is a confidential attorney work product of Calderwood & Harkness LLP, prepared in connection with the Firm's representation of Driftwood Absolute Return Fund Ltd. and is protected by the attorney-client privilege and the work product doctrine. This memorandum is intended solely for the use of the addressees named herein and other members of the Calderwood & Harkness engagement team. Distribution outside the Firm or to parties other than the client is not authorized without the prior written consent of the Responsible Partner.
Date | Event
May 15, 2023 | Engagement opened at Calderwood & Harkness LLP; matter initiated under Matter No. 1024-00004; engagement letter executed with Driftwood Absolute Return Fund Ltd.
May 22, 2023 | Warehouse credit facility ($250,000,000 revolving) executed between Driftwood CLO 2023-I, Ltd. and Havenwood Bank, N.A.; facility documented by Kenton & Caldwell LLP as warehouse lender's counsel
May 25, 2023 | Warehouse ramp begins; first collateral purchases executed by DCM under the warehouse facility
June 12, 2023 | First rating agency presentation delivered to Brindoval Analytical Services Inc. (Anita Delgado, Brian Whitford); presentation included manager overview, investment strategy, portfolio construction criteria, and preliminary capital structure
June 19, 2023 | Second rating agency presentation delivered to Ridgeline Credit Ratings LLC (Kenji Matsuda); presentation substantially similar to Brindoval presentation with supplemental analytics tailored to Ridgeline's methodology
July 28, 2023 | Rating agency model review completed by both Brindoval and Ridgeline; preliminary feedback received on capital structure and subordination levels
August 4, 2023 | Preliminary ratings received from both Brindoval and Ridgeline for all five rated note tranches; Preliminary Offering Memorandum circulated to prospective investors
August 15, 2023 | Warehouse ramp approximately 85% complete; DCM continues to acquire additional collateral to approach target par
August 18, 2023 | Final Offering Memorandum finalized and prepared for distribution in connection with signing
August 20, 2023 | Board resolutions adopted by authorized representatives of Driftwood CLO 2023-I, Ltd. (Issuer) and sole member consent executed by Driftwood CLO 2023-I, LLC (Co-Issuer) authorizing the execution and delivery of all transaction documents and the issuance of notes
August 22, 2023 | Signing — Indenture, Collateral Management Agreement, Co-Issuance Agreement, Collateral Administration Agreement, and ancillary documents executed and delivered by all parties; Final Offering Memorandum distributed to qualified institutional buyers and non-U.S. persons
September 8, 2023 | Pricing — Final pricing of all note tranches achieved; First Supplemental Indenture executed to reflect final pricing spreads and CUSIPs; Note Purchase Agreement executed among Issuers, Meridian Atlantic Securities LLC, and Northbridge Capital Markets Inc.; rating confirmation letters received from both Brindoval and Ridgeline confirming final ratings
September 12, 2023 | Closing — Notes issued by the Issuer and the Co-Issuer; warehouse facility taken out in full ($212,500,000 outstanding balance repaid from CLO note proceeds); legal opinions delivered by all counsel; officer's and secretary's certificates delivered; collateral assigned from warehouse to CLO Issuer and pledged to Ironclad Trust Company, N.A. under the Indenture; Closing Funds Flow Memorandum executed
September 20, 2023 | Final Settlement — Final settlement of all note tranches completed via DTC; transaction closed and completed; Master Closing Checklist finalized and confirmed
Tranche | Rating (CAS / RCR) | Principal Amount | Spread over SOFR | % of Capital Structure | CUSIP (144A)
Class A-1 Notes | AAA / AAA | $256,000,000 | +155 bps | 64.00% | 26738TAA5
Class A-2 Notes | AA / AA | $40,000,000 | +190 bps | 10.00% | 26738TAB3
Class B Notes | A / A | $28,000,000 | +230 bps | 7.00% | 26738TAC1
Class C Notes | BBB / BBB | $24,000,000 | +310 bps | 6.00% | 26738TAD9
Class D Notes | BB / BB | $16,000,000 | +625 bps | 4.00% | 26738TAE7
Subordinated Notes | NR / NR | $36,000,000 | Residual | 9.00% | 26738TAF4
Total | $400,000,000 | 100.00%
Tranche | Subordination Level
Class A-1 Notes | 36.00%
Class A-2 Notes | 26.00%
Class B Notes | 19.00%
Class C Notes | 13.00%
Class D Notes | 9.00%
Test | Requirement
Minimum Weighted Average Spread | 350 bps
Maximum Weighted Average Life | 7.5 years
Minimum Diversity Score | 60
Maximum CCC Bucket | 7.5% of aggregate collateral par ($30,000,000)
Maximum Second-Lien Bucket | 5.0% of aggregate collateral par ($20,000,000)
Maximum Fixed-Rate Bucket | 10.0% of aggregate collateral par ($40,000,000)
Minimum Weighted Average Recovery Rate | 45.0%
Minimum Weighted Average Rating Factor (WARF) | 2,850 (per Brindoval scale)
Test | Minimum O/C Ratio
Class A O/C Test | 128.00%
Class B O/C Test | 118.00%
Class C O/C Test | 110.00%
Class D O/C Test | 105.50%
Test | Minimum I/C Ratio
Class A I/C Test | 120.00%
Class B I/C Test | 115.00%
Class C I/C Test | 110.00%
Class D I/C Test | 105.00%
Fee | Recipient | Amount / Rate
Senior Collateral Management Fee | Driftwood Credit Management LLC | 0.15% per annum on aggregate collateral par ($600,000 per year); payable quarterly on each Payment Date, senior in the waterfall
Subordinate Collateral Management Fee | Driftwood Credit Management LLC | 0.35% per annum on aggregate collateral par ($1,400,000 per year); payable quarterly on each Payment Date, but only after payment of Class D Note interest and senior expenses in the waterfall
Incentive Management Fee | Driftwood Credit Management LLC | 20% of excess residual interest proceeds, payable only after holders of Subordinated Notes have received a cumulative internal rate of return of 12% on their initial investment
Trustee Fee | Ironclad Trust Company, N.A. | $25,000 per annum (flat fee), payable quarterly
Trustee Expense Cap | Ironclad Trust Company, N.A. | $50,000 per Payment Date; extraordinary expenses in excess of this cap require Collateral Manager and/or controlling class approval
Placement Fee | Meridian Atlantic Securities LLC | 0.50% of rated note principal = $1,820,000 (calculated as 0.005 × $364,000,000); paid at closing from note proceeds
Co-Placement Fee | Northbridge Capital Markets Inc. | 0.25% of subordinated note principal = $90,000 (calculated as 0.0025 × $36,000,000); paid at closing from note proceeds
Source | Amount
Class A-1 Note Proceeds | $256,000,000
Class A-2 Note Proceeds | $40,000,000
Class B Note Proceeds | $28,000,000
Class C Note Proceeds | $24,000,000
Class D Note Proceeds | $16,000,000
Subordinated Note Proceeds | $36,000,000
Total Sources | $400,000,000
Use | Amount
Warehouse Facility Payoff to Havenwood Bank, N.A. | $212,500,000 (plus accrued interest)
Placement Fee to Meridian Atlantic Securities LLC | $1,820,000
Co-Placement Fee to Northbridge Capital Markets Inc. | $90,000
Funding of Transaction Accounts (interest reserve account, expense reserve account) | Per Indenture requirements
New Collateral Purchases (to complete ramp to target par of $400,000,000) | Remaining proceeds after payment of above items
Transaction Expenses (legal fees, rating agency fees, trustee acceptance fees, printing costs, DTC fees, and other closing costs) | Per Closing Funds Flow Memorandum
Tranche | Brindoval (CAS) | Ridgeline (RCR)
Class A-1 Notes | AAA | AAA
Class A-2 Notes | AA | AA
Class B Notes | A | A
Class C Notes | BBB | BBB
Class D Notes | BB | BB
Subordinated Notes | NR | NR
Role | Name
Responsible Partner | Samuel Eklund
Billing Partner | Linda Osei
Lead Associate | Hannah Brinkley
Working Associate | Patrick Gallagher
Specialist Partner (Tax) | Sylvia Hartwell

CONFIDENTIAL / ATTORNEY WORK PRODUCT / PRIVILEGED

POST-CLOSING SUMMARY MEMORANDUM

MATTER NO.: 1024-00004

BILLING CODE: DARF-CLO-2023I

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