CONFIDENTIAL OFFERING MEMORANDUM

CONFIDENTIAL OFFERING MEMORANDUM
DATED AUGUST 18, 2023
THIS OFFERING MEMORANDUM SUPERSEDES THE PRELIMINARY OFFERING MEMORANDUM DATED AUGUST 4, 2023
DRIFTWOOD CLO 2023-I, LTD. (an exempted company with limited liability incorporated under the laws of the Cayman Islands)
and
DRIFTWOOD CLO 2023-I, LLC (a Delaware limited liability company)
as Co-Issuers
$400,000,000
Secured and Subordinated Notes Due 2036
Stated Maturity Date: October 15, 2036
Reference Rate: Compounded SOFR (with 26253 fallback convention)
Day Count Convention: Actual/360
Minimum Denomination (Rated Notes): $250,000 and integral multiples of $1,000 in excess thereof
Minimum Denomination (Subordinated Notes): $250,000 and integral multiples of $1 in excess thereof
Collateral Manager: Driftwood Credit Management LLC
Lead Placement Agent: Meridian Atlantic Securities LLC
Co-Placement Agent: Northbridge Capital Markets Inc.
Trustee, Paying Agent, Note Registrar, Transfer Agent, Custodian, and Collateral Administrator: Ironclad Trust Company, N.A.
THE NOTES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE NOTES ARE BEING OFFERED AND SOLD ONLY (I) TO QUALIFIED INSTITUTIONAL BUYERS ("QIBS") AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT AND (II) TO NON-U.S. PERSONS IN OFFSHORE TRANSACTIONS PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE RISK FACTORS DESCRIBED HEREIN BEGINNING ON PAGE 35.
THE NOTES ARE RESTRICTED SECURITIES AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THERE IS NO PUBLIC MARKET FOR THE NOTES AND NO ASSURANCE CAN BE GIVEN THAT A SECONDARY MARKET WILL DEVELOP.
THE NOTES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER GOVERNMENTAL AGENCY, OR ANY INSTRUMENTALITY THEREOF.
THE RATINGS ASSIGNED TO THE RATED NOTES BY BRINDOVAL ANALYTICAL SERVICES INC. AND RIDGELINE CREDIT RATINGS LLC ARE NOT A RECOMMENDATION TO PURCHASE, HOLD, OR SELL THE NOTES AND DO NOT ADDRESS THE LIKELIHOOD OF TIMELY PAYMENT OF PRINCIPAL OR INTEREST ON THE NOTES. RATINGS MAY BE REVISED OR WITHDRAWN AT ANY TIME.
IMPORTANT NOTICES AND DISCLAIMERS
The notes described in this offering memorandum (this "Offering Memorandum") are being offered only to (i) qualified institutional buyers ("QIBs") as defined in Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended (the "Securities Act"), and (ii) non-U.S. persons (as defined in Regulation S under the Securities Act) in offshore transactions pursuant to Regulation S ("Regulation S") under the Securities Act. The notes have not been and will not be registered under the Securities Act or the securities laws of any state of the United States or any other jurisdiction. No application has been made to the U.S. Securities and Exchange Commission (the "SEC") or any state securities commission for approval of this offering or any of the notes, and neither the SEC nor any state securities commission has passed upon the accuracy or adequacy of this Offering Memorandum or has approved or disapproved the notes. Any representation to the contrary is a criminal offense.
This Offering Memorandum supersedes the Preliminary Offering Memorandum dated August 4, 2023 (the "Preliminary Offering Memorandum") in its entirety. Any information contained in the Preliminary Offering Memorandum that is inconsistent with the information contained herein should be disregarded. Prospective investors who received the Preliminary Offering Memorandum should rely solely on the information contained in this Offering Memorandum.
Forward-Looking Statements. This Offering Memorandum contains certain forward-looking statements. These statements are based on the current expectations and beliefs of the Issuers and the Collateral Manager and are subject to significant risks, uncertainties, and assumptions. These risks and uncertainties include, but are not limited to, changes in general economic and market conditions, changes in interest rates and credit spreads, the performance and creditworthiness of the collateral obligations and the obligors thereunder, and other factors described in the "Risk Factors" section of this Offering Memorandum. Actual results may differ materially from those contemplated by such forward-looking statements. Neither the Issuers, the Collateral Manager, the Placement Agents, the Trustee, nor any of their respective affiliates undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Information Furnished by the Collateral Manager. Certain information contained in this Offering Memorandum has been provided by Driftwood Credit Management LLC (the "Collateral Manager" or "DCM") and its affiliates, including information regarding the Collateral Manager's investment philosophy, strategy, track record, and personnel. The Issuers have not independently verified, and make no representation or warranty regarding the accuracy or completeness of, any information provided by the Collateral Manager. The Collateral Manager has represented to the Issuers and the Placement Agents that all information provided by the Collateral Manager to the Issuers for inclusion in this Offering Memorandum is true, complete, and correct in all material respects as of the date hereof.
Rating Agency Disclaimer. The ratings assigned to the rated notes by Brindoval Analytical Services Inc. ("Brindoval") and Ridgeline Credit Ratings LLC ("Ridgeline") are not recommendations to purchase, hold, or sell the notes and do not address the market value of the notes or the suitability of any investment in the notes for any particular investor. Each rating reflects only the view of the applicable rating agency of the creditworthiness of the rated notes based on relevant factors. Ratings may be revised, suspended, or withdrawn at any time by the assigning rating agency if, in its sole judgment, circumstances warrant. There is no assurance that any rating will remain in effect for any period of time or that a rating will not be lowered or withdrawn. A downgrade or withdrawal of a rating may have an adverse effect on the market value and liquidity of the affected notes.
No Representation by Placement Agents, Trustee, or Their Counsel. None of the Placement Agents (Meridian Atlantic Securities LLC or Northbridge Capital Markets Inc.), the Trustee (Ironclad Trust Company, N.A.), or any of their respective affiliates, officers, directors, employees, agents, or counsel makes any representation or warranty, express or implied, with respect to the accuracy or completeness of the information contained in this Offering Memorandum. Prospective investors should conduct their own investigations and analysis of the Issuers, the Collateral Manager, the notes, and the collateral obligations, and should consult their own legal, tax, and financial advisors. Each of the Placement Agents is acting solely as placement agent and not as an advisor to any investor.
Responsibility for Contents. The Issuers and the Collateral Manager are responsible for the information contained in this Offering Memorandum. The Issuers accept responsibility for the accuracy of the information contained herein (other than information provided by the Collateral Manager), and the Collateral Manager accepts responsibility for the accuracy of the information provided by it.
Restriction on Distribution. This Offering Memorandum is provided on a confidential basis to prospective investors and is not to be reproduced, distributed, or disclosed to any other person, in whole or in part, without the prior written consent of the Lead Placement Agent. This Offering Memorandum does not constitute an offer to sell or a solicitation of an offer to buy the notes in any jurisdiction in which such offer or solicitation is unlawful. In particular, this Offering Memorandum may not be distributed in any jurisdiction where such distribution would be unlawful or would require registration, qualification, or licensing that has not been obtained.
Notice to EEA and UK Investors. The notes described in this Offering Memorandum are not intended to be offered, sold, or otherwise made available to and should not be offered, sold, or otherwise made available to any retail investor in the European Economic Area ("EEA") or the United Kingdom ("UK"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); or (ii) a customer within the meaning of Directive (EU) 2016/97 (the "Insurance Distribution Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the "Prospectus Regulation") or, in the case of the UK, equivalent legislation as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation") or the corresponding UK regulation for offering or selling the notes or otherwise making them available to retail investors in the EEA or the UK has been or will be prepared, and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA or the UK may be unlawful.
ERISA Legend. The rated notes (Class A-1, Class A-2, Class B, Class C, and Class D) are structured to be eligible for purchase by employee benefit plans and other benefit plan investors subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), subject to satisfaction of certain conditions described herein under "ERISA Considerations." The subordinated notes may NOT be acquired by or on behalf of benefit plan investors. The acquisition and holding of the subordinated notes by any benefit plan investor is prohibited.
Information Current Only as of Date Hereof. The delivery of this Offering Memorandum at any time after the date hereof does not imply that the information contained herein is correct as of any time subsequent to August 18, 2023. Neither the Issuers nor the Collateral Manager undertakes any obligation to update this Offering Memorandum to reflect events occurring after the date hereof.
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SUMMARY OF TERMS
The following summary highlights certain information about the notes and this offering. This summary is not complete and is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Offering Memorandum and in the transaction documents. Capitalized terms used but not defined in this summary have the meanings given to them in the "Glossary of Defined Terms" or elsewhere in this Offering Memorandum. Prospective investors should read this entire Offering Memorandum carefully, including the section entitled "Risk Factors," before making any investment decision.
The Issuers
Driftwood CLO 2023-I, Ltd. (the "Issuer") is an exempted company with limited liability incorporated under the laws of the Cayman Islands. 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's Cayman Registration Number is EX-382916. The Issuer is a special purpose entity organized solely for the purpose of issuing the notes and acquiring and holding the collateral obligations. The Issuer has no prior operating history, no employees, and no assets other than those acquired in connection with the transactions described in this Offering Memorandum.
Driftwood CLO 2023-I, LLC (the "Co-Issuer") is a Delaware limited liability company formed under the laws of the State of Delaware. The Co-Issuer's registered agent is National Registered Agents Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. The Co-Issuer's Delaware File Number is 7429831. The sole member of the Co-Issuer is the Issuer. The Co-Issuer is classified as a disregarded entity for U.S. federal income tax purposes. The activities of the Co-Issuer are limited to co-issuing the notes and performing related activities.
The Issuer and the Co-Issuer are collectively referred to herein as the "Co-Issuers."
Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF") is the sponsor of the transaction. Driftwood is a Cayman Islands exempted company registered with the Cayman Islands Monetary Authority ("CIMA") under CIMA Registration No. MC-2017-02834. As of the first quarter of 2023, Driftwood had approximately $6.8 billion in assets under management across multiple strategies, including structured credit, leveraged finance, distressed debt, and event-driven investing. Driftwood's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131. Driftwood was founded by Marcus Sorensen and operates across a diversified platform of asset management and banking strategies.
The Collateral Manager
Driftwood Credit Management LLC ("DCM" or the "Collateral Manager") is a wholly owned subsidiary of Driftwood Absolute Return Fund Ltd. DCM is a Delaware limited liability company and is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, as amended (CRD #182447). DCM's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131.
The Collateral Manager is responsible for portfolio selection, trading, credit surveillance, and ongoing management of the CLO's collateral pool in accordance with the terms of the Collateral Management Agreement and the Indenture. The Collateral Manager's investment philosophy emphasizes bottom-up fundamental credit analysis of broadly syndicated leveraged loans, with a focus on first-lien senior secured loans to U.S. corporate obligors.
Key Personnel:
•  Marcus Sorensen — Founder and Chief Investment Officer. Mr. Sorensen has 22 years of structured credit experience. Prior to founding Driftwood, Mr. Sorensen served as head of leveraged finance at Creston Merchant Bank, where he oversaw the origination, structuring, and trading of leveraged loan and high-yield bond portfolios across multiple credit cycles.
•  Elena Voss — President and Chief Operating Officer. Ms. Voss oversees all operational, compliance, and risk management functions of DCM. Prior to joining Driftwood, Ms. Voss served as Chief Operating Officer of Pinnacle Credit Advisors, a credit-focused investment firm.
•  David Hwan — Managing Director, Structured Credit. Mr. Hwan is the portfolio manager for DARF's CLO platform and is responsible for collateral selection, warehouse ramp execution, and ongoing credit surveillance for the Driftwood CLO program.
The Notes — Summary Capital Structure
The following table summarizes the capital structure of the transaction:
Total Rated Notes: $364,000,000
Total Deal Size: $400,000,000
Subordination Levels
The subordination available to each class of rated notes (expressed as a percentage of the aggregate principal amount of the collateral obligations) is as follows:
•  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%
Subordination represents the percentage of aggregate collateral par that is available to absorb losses before a given class of notes experiences a shortfall. The subordinated notes, as the most junior class in the capital structure, bear the first loss on the collateral portfolio and have no subordination credit.
Key Dates
The Effective Date shall occur no later than December 12, 2023, which is 90 days after the Pricing Date. The Non-Call Period extends for two years from the Closing Date. The Reinvestment Period extends for five years from the Closing Date.
Reference Rate and Day Count
Interest on the rated notes will accrue at a rate equal to Compounded SOFR (as determined in accordance with the 26253 fallback convention set forth in the Indenture) plus the applicable spread for each class of rated notes. The day count convention for all notes is Actual/360.
Collateral
The collateral for the notes will consist of a diversified portfolio of broadly syndicated first-lien senior secured leveraged loans, primarily to U.S. corporate obligors. The target portfolio par amount is $400,000,000. The portfolio is subject to eligibility criteria, collateral quality tests, and concentration limitations as described in the Indenture and elsewhere in this Offering Memorandum.
Rating Agencies
The rated notes have been rated by two nationally recognized statistical rating organizations:
•  Brindoval Analytical Services Inc. — a nationally recognized statistical rating organization ("NRSRO") organized as a Delaware corporation, with its principal office at 55 Water Street, 40th Floor, New York, New York 10041. The Brindoval team for this transaction consists of Anita Delgado (Senior Director) and Brian Whitford (Lead Analyst).
•  Ridgeline Credit Ratings LLC — an NRSRO organized as a Delaware limited liability company, with its principal office at 7 World Trade Center, 30th Floor, New York, New York 10007. The Ridgeline team for this transaction is led by Kenji Matsuda (Director).
Trustee, Paying Agent, Note Registrar, Transfer Agent, Custodian, Collateral Administrator
Ironclad Trust Company, N.A. is a national banking association and serves as the Trustee, Paying Agent, Note Registrar, Transfer Agent, Custodian, and Collateral Administrator under the Indenture and the Collateral Administration Agreement. Ironclad Trust's address is 100 Wall Street, Suite 1650, New York, New York 10005. Ironclad Trust's DTC Participant Number is 2176.
Account Bank
Havenwood Bank, N.A. is a national banking association and serves as the Account Bank for all CLO transaction accounts. Havenwood Bank's address is 227 West Monroe Street, Chicago, Illinois 60606.
Placement Agents
•  Lead Placement Agent: Meridian Atlantic Securities LLC (SEC CRD #39821), 383 Madison Avenue, 22nd Floor, New York, New York 10179.
•  Co-Placement Agent: Northbridge Capital Markets Inc., 1251 Avenue of the Americas, 34th Floor, New York, New York 10020.
Governing Law
The Indenture, the Collateral Management Agreement, and the Note Purchase Agreement are governed by the laws of the State of New York. Corporate matters relating to the Issuer are governed by the laws of the Cayman Islands.
Listing
The notes will not be listed on any securities exchange.
Offering Exemption
The notes are being offered and sold solely pursuant to Rule 144A and Regulation S under the Securities Act.
RISK FACTORS
Prospective investors should carefully consider the following risk factors, in addition to the other information contained in this Offering Memorandum, before making any investment decision with respect to the notes. The risks described below are not the only risks facing holders of the notes. Additional risks not currently known to the Issuers or the Collateral Manager, or that the Issuers or the Collateral Manager currently believe to be immaterial, may also adversely affect the notes. If any of the events described below occurs, the market value and liquidity of the notes could decline, and investors could lose some or all of their investment. Each prospective investor should consult its own legal, tax, and financial advisors before purchasing any notes.
Risks Relating to the Notes and the Offering
Limited Recourse Obligations. The notes are secured limited recourse obligations of the Co-Issuers only. Payment of principal and interest on the notes is dependent solely on the performance of the collateral obligations held by the Issuer and the funds available therefor in accordance with the priority of payments set forth in the Indenture. There is no recourse to Driftwood Absolute Return Fund Ltd., Driftwood Credit Management LLC, the Placement Agents, the Trustee, or any other person for any deficiency in payments on the notes. Noteholders have no right to compel any payment from any person other than the Co-Issuers, and then only from the proceeds of the collateral obligations and other amounts available in accordance with the Indenture. If the proceeds realized from the collateral obligations are insufficient to pay the full amount of principal and interest due on the notes, no other assets are available to make up any such shortfall.
No Established Trading Market; Illiquidity. There is currently no established trading market for the notes, and no assurance can be given that a secondary market will develop or, if one develops, that it will provide sufficient liquidity to allow holders to sell or dispose of their notes. The notes are not listed on any securities exchange, and no application has been made or will be made for the listing of the notes on any exchange. Consequently, holders of the notes may be unable to sell their notes at or above the price at which they acquired such notes, or at all. The liquidity of the notes may be affected by the general condition of the credit markets, the performance and perceived creditworthiness of the collateral obligations, and other factors. Even if a secondary market for the notes does develop, there can be no assurance that it will continue to exist or provide adequate liquidity.
Securities Act Restrictions. The notes have not been and will not be registered under the Securities Act or the securities laws of any state of the United States or any other jurisdiction. The notes may be resold only pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The transfer restrictions applicable to the notes may further limit the liquidity of the notes and may adversely affect the price at which holders are able to sell or transfer their notes.
Subordinated Notes Bear First Loss. The subordinated notes are unsecured, unrated, subordinated obligations of the Co-Issuers. Holders of the subordinated notes are entitled only to receive residual interest and principal payments after all amounts owing on the rated notes, trustee fees and expenses, collateral management fees, and other senior obligations have been paid in full in accordance with the priority of payments set forth in the Indenture. The subordinated notes bear the first loss on the collateral portfolio. In the event of defaults or losses in the collateral pool, holders of the subordinated notes may receive little or no return on their investment. There is no minimum return or guaranteed payment on the subordinated notes.
Conflicts of Interest. Driftwood Absolute Return Fund Ltd. acts as the sponsor of the transaction, and Driftwood Credit Management LLC, a wholly owned subsidiary of Driftwood, acts as the Collateral Manager. The Collateral Manager receives both a senior collateral management fee and a subordinate collateral management fee from the CLO, as well as an incentive management fee based on excess residual returns. The incentive management fee structure (20% of excess residual above a 12% IRR hurdle to subordinated noteholders) may create incentives for the Collateral Manager to pursue a more aggressive investment strategy or to retain riskier assets in the portfolio in order to maximize residual cash flows. In addition, Driftwood and its affiliates manage other funds and accounts that invest in broadly syndicated leveraged loans, and conflicts may arise in the allocation of investment opportunities among the CLO and such other funds and accounts. See "The Collateral Manager — Conflicts of Interest" and "Description of the Collateral Management Agreement."
Reinvestment Risk. During the Reinvestment Period (which extends from the Closing Date through September 12, 2028), the Collateral Manager has broad discretion to reinvest principal proceeds from the collateral obligations in new collateral obligations, subject to the eligibility criteria and collateral quality tests set forth in the Indenture. Reinvestment of principal proceeds introduces the risk that the Collateral Manager may acquire new collateral obligations that have different (and potentially inferior) credit characteristics, spreads, or maturities compared to the original collateral obligations. Changes in market conditions during the Reinvestment Period may make it difficult or impossible to identify and acquire suitable replacement collateral obligations at attractive prices and yields.
Non-Call Period. The notes may not be optionally redeemed prior to September 12, 2025 (two years after the Closing Date). Holders of the rated notes will therefore be unable to benefit from any decline in credit spreads or other favorable market conditions that would make refinancing or early redemption economically attractive during the Non-Call Period. The Non-Call Period also means that investors must hold their notes for at least two years (absent a sale in the secondary market, which may be limited due to the illiquidity of the notes) before there is any possibility of an optional redemption.
Dependence on the Collateral Manager; Key Person Risk. The performance of the collateral portfolio and, consequently, the performance of the notes, is highly dependent on the skill, experience, and judgment of the Collateral Manager and its key personnel, particularly Marcus Sorensen (Founder and Chief Investment Officer) and David Hwan (Managing Director, Structured Credit). There is no assurance that these individuals will remain employed by or affiliated with the Collateral Manager for the full term of the transaction. The departure of one or more key personnel could materially and adversely affect the ability of the Collateral Manager to manage the collateral portfolio effectively. The Collateral Management Agreement contains certain key person provisions, the breach of which may constitute a removal event, but the process of identifying, appointing, and transitioning to a successor collateral manager may take a significant period of time and may result in disruption to portfolio management.
Ratings Not a Guarantee. The ratings assigned to the rated notes by Brindoval and Ridgeline are not a guarantee of credit quality or a recommendation to purchase, hold, or sell the notes. Ratings address only the creditworthiness of the rated notes based on the information available to the rating agencies at the time the ratings are assigned and the analytical models and assumptions employed by each rating agency. A rating is not an assessment of market value or liquidity. Ratings may be revised, suspended, or withdrawn at any time by the applicable rating agency. A downgrade of the ratings of the notes could have an adverse effect on the market value and liquidity of the affected notes, and could trigger certain consequences under the Indenture. There is no assurance that the current ratings will be maintained for any period of time.
Risks Relating to the Collateral
Credit Risk of Underlying Obligors. The collateral obligations consist primarily of broadly syndicated first-lien senior secured leveraged loans to U.S. corporate obligors. These leveraged loans are made to borrowers that typically have significant amounts of indebtedness and whose creditworthiness is generally rated below investment grade. The ability of such borrowers to make payments of interest and principal on their debt obligations is dependent on their financial condition, cash flows, and operating performance, which in turn are subject to range risks, including general economic conditions, industry-specific risks, competitive pressures, management quality, regulatory developments, and other factors. There can be no assurance that any borrower will make timely payments of principal and interest on its obligations, or that the market value of any collateral obligation will not decline significantly.
Leveraged Loan Market Liquidity Risk. The secondary market for broadly syndicated leveraged loans may experience periods of limited liquidity, particularly during times of market stress. During such periods, the prices at which the Collateral Manager may be able to sell collateral obligations, or the terms on which new collateral obligations may be acquired, may be materially less favorable than would otherwise be the case. Illiquidity in the leveraged loan market may also adversely affect the Collateral Manager's ability to comply with the collateral quality tests and concentration limitations set forth in the Indenture.
Concentration Risk. Although the Indenture imposes diversity score requirements and concentration limitations on the collateral portfolio, the portfolio will inevitably be concentrated in a limited number of obligors and industry sectors. The portfolio's diversity score must be at least 60, but even with this requirement, losses may be disproportionately concentrated in certain segments of the portfolio. A decline in the performance of obligors in a particular industry sector or geographic region could have a disproportionate impact on the portfolio's overall performance.
CCC and Sub-Investment-Grade Exposure. The Indenture permits the collateral portfolio to include up to 7.5% of aggregate collateral par ($30,000,000) in CCC-rated assets. Collateral obligations rated CCC or below are subject to significantly higher default rates and lower recovery rates than higher-rated assets. In addition, the Indenture permits the portfolio to include up to 5.0% of aggregate collateral par ($20,000,000) in second-lien assets, which are subordinate to first-lien debt in the obligor's capital structure and typically have lower recovery rates in the event of default. The portfolio may also include up to 10.0% of aggregate collateral par ($40,000,000) in fixed-rate assets, which may expose the portfolio to interest rate risk. Each of these asset types may introduce additional volatility to the portfolio's performance.
Weighted Average Life and Spread Compression. Over time, the weighted average life of the collateral portfolio may decrease as collateral obligations mature, are prepaid, or are called by their obligors. In a declining interest rate environment or in periods of strong credit market conditions, obligors may refinance their leveraged loans at lower spreads, resulting in spread compression in the collateral portfolio. If the Collateral Manager is required to reinvest principal proceeds at lower spreads, the aggregate interest income generated by the portfolio may decrease, potentially reducing the excess spread available to service the rated notes and make residual payments to the subordinated noteholders.
Recovery Rate Assumptions. The Indenture requires the portfolio to maintain a minimum weighted average recovery rate of 45.0%. Recovery rates on defaulted leveraged loans can vary significantly depending on the obligor's industry, the nature of the collateral securing the loan, the seniority of the loan in the obligor's capital structure, and prevailing economic conditions. There can be no assurance that actual recovery rates will meet or exceed the minimum required level, or that the assumptions used by the rating agencies in assigning their ratings will prove to be accurate.
WARF Constraints. The collateral portfolio is subject to a minimum Weighted Average Rating Factor (WARF) of 2,850 on the Brindoval scale. The WARF is a measure of the weighted average credit quality of the portfolio, with higher WARF values generally indicating lower credit quality. If the credit quality of the collateral obligations deteriorates (whether through rating downgrades, defaults, or other events), the portfolio's WARF may fall below the minimum threshold, potentially triggering trading restrictions or other remedial actions under the Indenture.
Default and Loss Experience. Leveraged loan portfolios have historically experienced varying levels of defaults and losses across different economic cycles. Past performance of leveraged loan portfolios, whether managed by the Collateral Manager or by other managers, is not necessarily indicative of future results. Periods of economic recession, rising interest rates, or systemic credit stress may result in significantly elevated default rates and reduced recovery rates, which could materially and adversely affect the performance of the collateral portfolio and the notes.
Interest Rate Mismatch Risk. The rated notes bear interest at floating rates tied to Compounded SOFR, while the collateral portfolio may include up to 10.0% ($40,000,000) in fixed-rate assets. To the extent that the portfolio includes fixed-rate assets, there may be a mismatch between the fixed-rate interest income received on such assets and the floating-rate interest obligations on the rated notes. In a rising interest rate environment, the cost of servicing the floating-rate notes may increase while the income from fixed-rate assets remains unchanged, potentially reducing the excess spread available in the waterfall.
SOFR Transition and Benchmark Replacement Risk. The rated notes bear interest based on Compounded SOFR, as determined in accordance with the 26253 fallback convention set forth in the Indenture. SOFR is a relatively new reference rate, and its characteristics and behavior may differ from those of the London Interbank Offered Rate ("LIBOR"), which was previously the most commonly used benchmark rate for floating-rate obligations. There is limited historical data regarding SOFR, and the relationship between SOFR and other market interest rates may not remain stable. The Indenture contains benchmark replacement provisions that provide for the transition to an alternative reference rate in the event that SOFR becomes unavailable, but there can be no assurance that any such alternative reference rate will be economically equivalent to SOFR or that the transition will be seamless.
Risks Relating to the Collateral Manager
Limited Operating History. DCM has limited operating history as a standalone CLO collateral manager. While the principals of DCM have significant experience in the leveraged loan and structured credit markets, the performance of DCM in managing a CLO portfolio over a full economic cycle has not been established. Past performance of Driftwood's leveraged loan portfolio or other investment strategies is not necessarily indicative of DCM's ability to manage the collateral portfolio of this CLO effectively.
Reliance on Key Personnel. The Collateral Manager's performance is heavily dependent on its key personnel, particularly Marcus Sorensen and David Hwan. There is no assurance that these individuals will continue to be employed by or affiliated with the Collateral Manager for the term of the transaction. The loss of one or more key personnel could materially and adversely affect the Collateral Manager's investment decisions and overall portfolio management.
Potential Conflicts of Interest. As a wholly owned subsidiary of Driftwood, DCM may face conflicts of interest in allocating investment opportunities among the CLO and other Driftwood-managed funds and accounts. Driftwood and its affiliates may manage other CLOs, credit funds, or separately managed accounts that invest in the same types of leveraged loans as the CLO. In such circumstances, DCM may be required to allocate investment opportunities in accordance with its allocation policies, which may not always result in allocations to the CLO. Additionally, the fee structure of the Collateral Management Agreement — particularly the incentive management fee — may create incentives for DCM to take on additional risk in order to maximize residual cash flows.
Collateral Manager Removal and Replacement. The Collateral Management Agreement provides that the Collateral Manager may be removed for cause by a majority of subordinated noteholders or the controlling class upon the occurrence of specified events, including a material breach of the Collateral Management Agreement, regulatory disqualification, or a key person departure. The process of identifying and appointing a successor collateral manager may take a significant period of time and may be disruptive to the management of the collateral portfolio. There is no assurance that a qualified replacement collateral manager would be willing to assume the role or that the transition would be completed without adverse consequences to the portfolio.
Risks Relating to Regulatory and Tax Matters
Risk Retention. To the extent applicable, the transaction is intended to comply with EU and UK risk retention requirements. The risk retention arrangements, if any, are described in "Certain Regulatory Matters — EU/UK Securitisation Regulation and Risk Retention." There can be no assurance that the risk retention arrangements, if applicable, will satisfy current or future regulatory requirements. Changes in the applicable regulations or their interpretation could result in the transaction failing to comply with such requirements, which could adversely affect certain investors.
Volcker Rule. The notes are CLO interests and are not intended to constitute "ownership interests" in a "covered fund" for purposes of the Volcker Rule (Section 619 of the Dodd-Frank Act). However, there can be no assurance that the Volcker Rule or its implementing regulations will not be revised in a manner that could adversely affect the ability of certain investors to hold the notes.
Investment Company Act. The Issuer is not and will not be required to register as an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), in reliance on the exemption provided by Rule 3a-7 thereunder. If, for any reason, the Issuer were determined to be required to register under the Investment Company Act, such registration would impose significant operational and regulatory burdens and could adversely affect the ability of the Issuer to operate the collateral portfolio as contemplated.
ERISA. The rated notes are structured to be eligible for purchase by employee benefit plans and other benefit plan investors subject to ERISA and Section 4975 of the Code, subject to satisfaction of certain conditions. However, the subordinated notes may NOT be acquired by benefit plan investors. There can be no assurance that the conditions for ERISA eligibility of the rated notes will continue to be satisfied. Benefit plan investors should consult with their own ERISA counsel before acquiring any notes.
Tax Risk. The Issuer has been structured to avoid being treated as engaged in a U.S. trade or business for U.S. federal income tax purposes. However, there is a risk that the IRS could assert that the Issuer is so engaged, in which case the Issuer could be subject to U.S. federal income tax on its net taxable income, which could significantly reduce the cash flows available to service the notes. In addition, there is a risk that the Co-Issuer may not be treated as a disregarded entity for U.S. federal income tax purposes, which could result in adverse tax consequences to the Issuers and the noteholders.
FATCA/CRS Withholding Risk. The Issuer has registered as a Reporting Foreign Financial Institution with the Cayman Islands Tax Information Authority for purposes of the Foreign Account Tax Compliance Act ("FATCA"). Payments made to non-participating foreign financial institutions or non-compliant investors may be subject to FATCA withholding. In addition, the Issuer is subject to reporting obligations under the Common Reporting Standard ("CRS"). Failure to comply with FATCA or CRS requirements could result in withholding on payments to certain noteholders.
Cayman Islands Tax Risk. The Cayman Islands currently does not impose any income, capital gains, withholding, or other taxes on the Issuer or on payments made by the Issuer to noteholders. However, there can be no assurance that the Cayman Islands will not enact legislation imposing such taxes in the future. Any such legislative change could adversely affect the cash flows available to service the notes.
Risks Relating to the Structure
Overcollateralization and Interest Coverage Test Failure Risk. The Indenture contains overcollateralization ("O/C") tests and interest coverage ("I/C") tests for the benefit of the rated notes. If any O/C test or I/C test is not satisfied as of any Measurement Date, interest proceeds and/or principal proceeds that would otherwise be available for distribution to more junior classes of notes (or to the Collateral Manager as a subordinate fee or incentive fee) will be diverted to redeem the most senior outstanding class of rated notes until the applicable test is satisfied. The failure of an O/C test or I/C test could result in a significant reduction in, or elimination of, distributions to the subordinated noteholders and could impair the ability of more junior rated notes to receive timely payments of interest.
Waterfall Mechanics and Subordination of Collateral Management Fees. The subordinate collateral management fee (0.35% per annum on aggregate collateral principal balance, equal to approximately $1,400,000 per year at par) is payable only after Class D Note interest and all senior expenses in the priority of payments. In the event of a deterioration in the performance of the collateral portfolio, the subordinate collateral management fee may not be paid, which could reduce the Collateral Manager's incentive to devote resources to the management of the portfolio. In addition, the incentive management fee (20% of excess residual above a 12% IRR hurdle to subordinated noteholders) is payable only after all other obligations in the waterfall have been satisfied.
Effective Date Risk. The Effective Date must occur no later than December 12, 2023 (90 days after the Pricing Date). On or prior to the Effective Date, the collateral portfolio must be fully ramped to the target par of $400,000,000, and all collateral quality tests must be satisfied. If the Collateral Manager is unable to acquire sufficient eligible collateral obligations to satisfy the Effective Date conditions by the deadline, the consequences may include a special redemption of the notes. There can be no assurance that the Collateral Manager will be able to fully ramp the portfolio within the prescribed time frame, particularly if market conditions deteriorate or the availability of eligible collateral obligations diminishes.
THE COLLATERAL MANAGER
Overview of Driftwood Credit Management LLC
Driftwood Credit Management LLC ("DCM" or the "Collateral Manager") is a Delaware limited liability company and a wholly owned subsidiary of Driftwood Absolute Return Fund Ltd. ("Driftwood" or "DARF"). DCM is registered as an investment adviser with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended (CRD #182447). DCM's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131.
DCM manages the CLO platform and other structured credit strategies within the broader Driftwood investment management organization. DCM's investment activities are focused on the origination, analysis, and active management of diversified portfolios of broadly syndicated leveraged loans, with a particular emphasis on first-lien senior secured loans to U.S. corporate obligors. DCM's investment team combines deep experience in leveraged finance, credit analysis, and structured products, and benefits from the broader resources and infrastructure of the Driftwood platform.
DCM's independent auditors are Greystone Audit Partners LLP, located at 345 Hudson Street, New York, New York 10014.
Driftwood Absolute Return Fund Ltd. (Sponsor)
Driftwood Absolute Return Fund Ltd. ("DARF" or "Driftwood") is a Cayman Islands exempted company registered with the Cayman Islands Monetary Authority under CIMA Registration No. MC-2017-02834. As of the first quarter of 2023, Driftwood had approximately $6.8 billion in assets under management across a diversified platform of investment strategies, including structured credit, leveraged finance, distressed debt, event-driven investing, and banking-related activities.
Driftwood was founded by Marcus Sorensen with the objective of creating a comprehensive credit-focused investment platform capable of generating attractive risk-adjusted returns across market cycles. Since its founding, Driftwood has grown its asset base through a combination of organic growth and strategic initiatives, and has expanded its investment capabilities to encompass multiple asset classes and geographies.
Driftwood's principal office is located at 200 Brickell Avenue, Suite 3100, Miami, Florida 33131.
Key Personnel
The following individuals are the key personnel of the Collateral Manager and are primarily responsible for the management of the collateral portfolio:
Marcus Sorensen — Founder and Chief Investment Officer. Mr. Sorensen founded Driftwood and serves as its Chief Investment Officer. He has 22 years of experience in the structured credit and leveraged finance markets. Prior to founding Driftwood, Mr. Sorensen served as head of leveraged finance at Creston Merchant Bank, where he was responsible for overseeing the origination, structuring, syndication, and trading of leveraged loan and high-yield bond portfolios. During his tenure at Creston, Mr. Sorensen managed credit portfolios with aggregate par values in excess of $15 billion and navigated the portfolio through multiple credit cycles, including the 2008 global financial crisis. Mr. Sorensen holds a Bachelor of Science degree in Economics from the University of Pennsylvania and a Master of Business Administration from Columbia Business School.
Elena Voss — President and Chief Operating Officer. Ms. Voss serves as President and Chief Operating Officer of DCM, with oversight of all operational, compliance, and risk management functions. Prior to joining Driftwood, Ms. Voss served as Chief Operating Officer of Pinnacle Credit Advisors, a credit-focused investment management firm with approximately $3.5 billion in assets under management. At Pinnacle, Ms. Voss was responsible for establishing and maintaining operational infrastructure, compliance programs, and risk management frameworks for multiple CLO vehicles and credit fund strategies. Ms. Voss holds a Bachelor of Arts degree from Georgetown University and a Juris Doctor from New York University School of Law.
David Hwan — Managing Director, Structured Credit. Mr. Hwan serves as a Managing Director within DCM's Structured Credit group and is the portfolio manager for DARF's CLO platform. Mr. Hwan is responsible for collateral selection, warehouse ramp execution, ongoing credit surveillance, and portfolio trading for the Driftwood CLO program. Mr. Hwan has over 15 years of experience in the leveraged loan and CLO markets, having held positions in portfolio management, credit analysis, and structured products at several leading financial institutions. Mr. Hwan holds a Bachelor of Science degree in Finance from the University of Michigan and is a Chartered Financial Analyst (CFA) charterholder.
Investment Philosophy and Process
The Collateral Manager's investment philosophy is grounded in bottom-up fundamental credit analysis of broadly syndicated leveraged loans. DCM believes that thorough, independent credit analysis — combined with disciplined portfolio construction and active surveillance — is the key to generating attractive risk-adjusted returns while minimizing downside risk. The Collateral Manager's investment process encompasses the following core elements:
Credit Analysis. DCM's investment process begins with a rigorous, bottom-up analysis of each potential collateral obligation. The credit analysis is conducted by DCM's team of experienced credit analysts and portfolio managers, who evaluate the fundamental creditworthiness of each obligor by examining, among other things, the obligor's industry dynamics, competitive position, financial condition, cash flow generation, management quality, capital structure, and covenant protections. DCM's analysts also assess the structural features of each loan, including seniority, collateral coverage, and recovery prospects.
Portfolio Construction. Once individual credit assessments have been completed, the Collateral Manager constructs the portfolio with an emphasis on diversification, credit quality, and consistency with the Indenture's eligibility criteria and collateral quality tests. Portfolio construction is guided by the Indenture's concentration limitations (including obligor, industry, and geographic limits), the minimum diversity score requirement, and the other collateral quality tests described in "Description of the Indenture — Collateral Quality Tests." DCM seeks to build a portfolio that maximizes expected return per unit of risk while maintaining adequate cushion relative to the coverage tests.
Credit Surveillance. Following the initial investment, DCM conducts ongoing credit surveillance of all obligors in the portfolio. This surveillance process includes regular review of obligor financial statements, industry trends, and market developments, as well as monitoring of credit ratings and market pricing of each obligor's debt. DCM's surveillance process is designed to identify early warning signs of credit deterioration and to enable timely trading decisions to preserve portfolio quality.
Active Trading. During the Reinvestment Period, the Collateral Manager has discretion to actively trade collateral obligations in order to optimize portfolio performance, improve credit quality, and take advantage of relative value opportunities in the leveraged loan market. Trading activity is subject to the eligibility criteria, collateral quality tests, and concentration limitations set forth in the Indenture. Post-Reinvestment Period, trading is limited to credit-risk and credit-improved sales, with reinvestment permitted only in certain narrowly defined circumstances.
Track Record
Driftwood CLO 2023-I is the first CLO vehicle issued by DCM as standalone collateral manager. However, the Driftwood investment platform has a significant track record of managing leveraged loan portfolios across multiple market cycles. Driftwood's broader leveraged loan and structured credit portfolio has demonstrated consistent performance through periods of market volatility, including the credit market dislocation that occurred in 2020. As of the first quarter of 2023, the DARF leveraged loan portfolio had experienced cumulative default rates well below the industry average for broadly syndicated leveraged loan portfolios, reflecting the effectiveness of the investment team's credit selection and surveillance processes. Past performance is not indicative of future results.
Conflicts of Interest
Prospective investors should carefully consider the following potential conflicts of interest in evaluating the Collateral Manager:
Affiliate Relationships. DCM is a wholly owned subsidiary of Driftwood, which sponsors the CLO and may manage other funds and accounts that invest in broadly syndicated leveraged loans. Conflicts may arise in the allocation of investment opportunities between the CLO and other Driftwood-managed funds and accounts. DCM has adopted allocation policies and procedures designed to ensure that investment opportunities are allocated fairly among its various clients, but there can be no assurance that such policies will eliminate all potential conflicts.
Fee Structure. DCM receives a senior collateral management fee and a subordinate collateral management fee from the CLO, as well as an incentive management fee based on excess residual returns. The senior collateral management fee (0.15% per annum on aggregate collateral principal balance, equal to approximately $600,000 per year at par) is payable prior to any payments on the rated notes in the interest waterfall. The subordinate collateral management fee (0.35% per annum on aggregate collateral principal balance, equal to approximately $1,400,000 per year at par) is payable after Class D Note interest and other senior obligations. The incentive management fee (20% of excess residual interest proceeds above a 12% IRR hurdle to subordinated noteholders) is payable only after all other obligations in the waterfall have been satisfied. The incentive management fee structure may create an incentive for the Collateral Manager to take on additional portfolio risk in order to maximize residual cash flows.
Other Activities. Driftwood and its affiliates may engage in other business activities, including proprietary trading, advisory services, and other investment management activities, that may compete with or be complementary to the activities of the CLO. DCM is not required to devote its efforts exclusively to the management of the CLO's collateral portfolio, although DCM is required to perform its duties under the Collateral Management Agreement in good faith and in accordance with reasonable commercial standards.
DESCRIPTION OF THE NOTES
General
The notes are issued pursuant to an Indenture dated as of August 22, 2023 (the "Base Indenture") among Driftwood CLO 2023-I, Ltd. (the "Issuer"), Driftwood CLO 2023-I, LLC (the "Co-Issuer"), and Ironclad Trust Company, N.A. (the "Trustee"), as supplemented by the First Supplemental Indenture dated as of September 8, 2023 (the "First Supplemental Indenture" and, together with the Base Indenture, the "Indenture"). The Indenture sets forth the terms of the notes, the security for the notes, the priority of payments, the collateral quality tests, the coverage tests, and other provisions governing the transaction.
The rated notes (the Class A-1 Notes, Class A-2 Notes, Class B Notes, Class C Notes, and Class D Notes) are secured obligations of the Co-Issuers, secured by a first-priority perfected security interest in the collateral obligations and the funds on deposit in the transaction accounts, as described in "Security for the Notes." The subordinated notes are unsecured, subordinated obligations of the Co-Issuers, and holders of the subordinated notes are entitled only to residual payments after all amounts owing on the rated notes and other senior obligations have been paid.
The notes are issued in book-entry form through the facilities of The Depository Trust Company ("DTC"). Ironclad Trust Company, N.A. is a DTC participant (DTC Participant No. 2176) and serves as Trustee, Paying Agent, Note Registrar, Transfer Agent, Custodian, and Collateral Administrator under the Indenture and the related transaction documents. Beneficial interests in the notes are reflected in, and transfers thereof are effected only through, records maintained by DTC and its participants.
Terms of the Notes — Detailed Tranche Descriptions
Class A-1 Notes
The Class A-1 Secured Floating Rate Notes Due 2036 (the "Class A-1 Notes") have an aggregate principal amount of $256,000,000 and bear interest at a rate of Compounded SOFR plus 155 basis points per annum. The Class A-1 Notes are rated AAA by Brindoval and AAA by Ridgeline. The CUSIP for the Class A-1 Notes offered pursuant to Rule 144A is 26738TAA5, and the CUSIP for the Class A-1 Notes offered pursuant to Regulation S is G2694LAA7. The ISIN for the Rule 144A notes is US26738TAA51. The Class A-1 Notes have 36.00% subordination, reflecting the percentage of the aggregate collateral par that is junior to the Class A-1 Notes in the capital structure and available to absorb losses before the Class A-1 Notes are affected. The Class A-1 Notes are the most senior class of notes in the capital structure and have the first priority of payment among the rated notes in both the interest waterfall and the principal waterfall.
Class A-2 Notes
The Class A-2 Secured Floating Rate Notes Due 2036 (the "Class A-2 Notes") have an aggregate principal amount of $40,000,000 and bear interest at a rate of Compounded SOFR plus 190 basis points per annum. The Class A-2 Notes are rated AA by Brindoval and AA by Ridgeline. The CUSIP for the Class A-2 Notes offered pursuant to Rule 144A is 26738TAB3. The Class A-2 Notes have 26.00% subordination. The Class A-2 Notes rank immediately junior to the Class A-1 Notes and senior to the Class B Notes, Class C Notes, Class D Notes, and subordinated notes in the priority of payments.
Class B Notes
The Class B Secured Floating Rate Notes Due 2036 (the "Class B Notes") have an aggregate principal amount of $28,000,000 and bear interest at a rate of Compounded SOFR plus 230 basis points per annum. The Class B Notes are rated A by Brindoval and A by Ridgeline. The CUSIP for the Class B Notes offered pursuant to Rule 144A is 26738TAC1. The Class B Notes have 19.00% subordination. The Class B Notes rank immediately junior to the Class A-2 Notes and senior to the Class C Notes, Class D Notes, and subordinated notes in the priority of payments.
Class C Notes
The Class C Secured Floating Rate Notes Due 2036 (the "Class C Notes") have an aggregate principal amount of $24,000,000 and bear interest at a rate of Compounded SOFR plus 310 basis points per annum. The Class C Notes are rated BBB by Brindoval and BBB by Ridgeline. The CUSIP for the Class C Notes offered pursuant to Rule 144A is 26738TAD9. The Class C Notes have 13.00% subordination. The Class C Notes rank immediately junior to the Class B Notes and senior to the Class D Notes and subordinated notes in the priority of payments.
Class D Notes
The Class D Secured Floating Rate Notes Due 2036 (the "Class D Notes") have an aggregate principal amount of $16,000,000 and bear interest at a rate of Compounded SOFR plus 625 basis points per annum. The Class D Notes are rated BB by Brindoval and BB by Ridgeline. The CUSIP for the Class D Notes offered pursuant to Rule 144A is 26738TAE7. The Class D Notes have 9.00% subordination. The Class D Notes rank immediately junior to the Class C Notes and senior to the subordinated notes in the priority of payments. The Class D Notes are the most junior class of rated notes.
Subordinated Notes.  The Subordinated Notes Due 2036 (the "Subordinated Notes") have an aggregate principal amount of $36,000,000. The Subordinated Notes are not rated. The CUSIP for the Subordinated Notes offered pursuant to Rule 144A is 26738TAF4. The Subordinated Notes are unsecured, subordinated obligations of the Co-Issuers and are entitled only to receive residual interest and principal payments after all amounts owing on the rated notes, trustee fees and expenses, collateral management fees, and other senior obligations have been paid in full in accordance with the priority of payments set forth in the Indenture. The Subordinated Notes bear the first loss on the collateral portfolio and have no subordination credit.
Interest
Interest on the rated notes accrues at a per annum rate equal to Compounded SOFR (as determined in accordance with the 26253 fallback convention set forth in the Indenture) plus the applicable spread for each class of rated notes. Interest is computed on the basis of the actual number of days elapsed over a 360-day year (Actual/360 day count convention).
Interest on the rated notes is payable quarterly on each Payment Date, which is the 15th day of January, April, July, and October of each year (or, if any such date is not a Business Day, the next succeeding Business Day), commencing on January 15, 2024 (the "First Payment Date"). The record date for each Payment Date is the 15th calendar day precedi