CONFIDENTIAL
BRINDOVAL ANALYTICAL SERVICES INC. 55 Water Street, 40th Floor New York, NY 10041 Telephone: (212) 555-7800 Facsimile: (212) 555-7801 www.crestviewratings.com
Date: ____
Driftwood CLO 2023-I, Ltd. PO Box 4927, Windward House, 3rd Floor George Town, Grand Cayman KY1-1306 Cayman Islands
Attention: Authorized Director / Officer
With a copy to:
Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100 Miami, FL 33131
Attention: David Hwan, Managing Director, Structured Credit
Calderwood & Harkness LLP 450 Park Avenue New York, NY 10022
Attention: Samuel Eklund, Partner / Hannah Brinkley, Associate
RATING AGENCY ENGAGEMENT LETTER Driftwood CLO 2023-I
Ladies and Gentlemen:
This letter agreement (this "Engagement Letter") sets forth the terms and conditions under which Brindoval Analytical Services Inc. ("Brindoval" or "CAS") has been engaged to assign and maintain credit ratings on certain classes of secured notes issued in connection with the Driftwood CLO 2023-I transaction described herein. This Engagement Letter is entered into in connection with the rating process initiated on June 12, 2023, and prior to the issuance of preliminary ratings on August 4, 2023.
Section 1: Engagement and Scope of Services
1.1 Purpose. Brindoval Analytical Services Inc. ("Brindoval" or "CAS"), a nationally recognized statistical rating organization ("NRSRO") registered with the United States Securities and Exchange Commission (the "SEC") pursuant to Section 15E of the Securities Exchange Act of 1934, as amended, is engaged by Driftwood CLO 2023-I, Ltd. (the "Issuer"), an exempted company with limited liability incorporated under the laws of the Cayman Islands (Registration No. EX-382916), to assign and maintain credit ratings on certain classes of secured notes (the "Rated Notes") to be issued by the Issuer and Driftwood CLO 2023-I, LLC (the "Co-Issuer"), a Delaware limited liability company (DE File No. 7429831), pursuant to an Indenture dated as of August 22, 2023 (the "Indenture"), among the Issuer, the Co-Issuer, and Ironclad Trust Company, N.A., as trustee (the "Trustee") and collateral administrator.
The transaction that is the subject of this Engagement Letter is identified as Driftwood CLO 2023-I (the "Transaction"). The Transaction is structured as a broadly syndicated cash-flow collateralized loan obligation ("CLO"), with a total deal size of $400,000,000 in aggregate principal amount of notes (including both rated and unrated classes). The CLO is managed by Driftwood Credit Management LLC, a Delaware limited liability company and SEC-registered investment adviser, in accordance with the terms of the Collateral Management Agreement described further herein.
This Engagement Letter governs the relationship between Brindoval and the Issuer with respect to the assignment of initial credit ratings and the provision of ongoing surveillance services for the Rated Notes throughout their term.
1.2 Rated Classes
Brindoval is engaged to assign initial credit ratings and to provide ongoing surveillance ratings on the following classes of secured notes issued pursuant to the Indenture:
The aggregate principal amount of the Rated Notes is $364,000,000. For the avoidance of doubt, the Subordinated Notes in an aggregate principal amount of $36,000,000 are not rated by Brindoval and are expressly excluded from the scope of this engagement. Brindoval undertakes no obligation to assign, monitor, or maintain any rating on the Subordinated Notes.
The Rated Notes are dual-rated. In addition to ratings assigned by Brindoval, the Issuer has separately engaged Ridgeline Credit Ratings LLC ("Ridgeline") to assign ratings on the same classes of Rated Notes. Brindoval's ratings are assigned independently and without reference to the ratings assigned by Ridgeline, and the engagement of Ridgeline does not affect Brindoval's obligations or analytical process under this Engagement Letter.
1.3 CUSIPs and ISINs of Rated Notes
The following CUSIPs and ISINs have been assigned to the Rated Notes for purposes of identification in the securities markets:
• Class A-1 Notes (Rule 144A): CUSIP 26738TAA5; ISIN US26738TAA51
• Class A-1 Notes (Regulation S): CUSIP G2694LAA7
• Class A-2 Notes (Rule 144A): CUSIP 26738TAB3
• Class B Notes (Rule 144A): CUSIP 26738TAC1
• Class C Notes (Rule 144A): CUSIP 26738TAD9
• Class D Notes (Rule 144A): CUSIP 26738TAE7
Additional Regulation S CUSIPs for the Class A-2, Class B, Class C, and Class D Notes, if applicable, will be provided to Brindoval upon issuance and will be incorporated into Brindoval's surveillance records.
1.4 Offering Exemption
The Rated Notes are being offered and sold pursuant to exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act"), specifically Rule 144A promulgated thereunder and Regulation S thereunder. The Rated Notes have not been, and will not be, registered under the Securities Act or under any state securities laws, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Brindoval's assignment of ratings to the Rated Notes does not constitute, and shall not be construed as, an endorsement of the offering or sale of the Rated Notes or a recommendation to any investor to purchase, hold, or sell the Rated Notes.
1.5 Initial Rating Assignment
Brindoval will conduct its initial credit analysis in connection with the Transaction, which includes, without limitation, a comprehensive review of (i) the composition, credit quality, and risk characteristics of the collateral pool, (ii) the structural features of the Transaction, including the priority of payments waterfall, subordination levels, and coverage test thresholds, (iii) the capabilities, track record, and investment management processes of the Collateral Manager, (iv) the legal structure and enforceability of key transaction documents, and (v) such other factors as Brindoval deems relevant to its analysis.
Upon completion of its initial credit analysis, Brindoval will assign preliminary ratings to the Rated Notes. Preliminary ratings will be communicated in writing (including by email) to the Issuer, the Collateral Manager, and their counsel. Preliminary ratings are subject to the satisfactory completion of Brindoval's review of final transaction documentation and satisfaction of all closing conditions, and may be revised or withdrawn prior to the assignment of final ratings if Brindoval determines that material changes have occurred.
Final rating confirmation will be delivered by Brindoval at or prior to the pricing date for the Transaction, which is anticipated to be September 8, 2023 (the "Pricing Date"). The final ratings will be confirmed in writing and will be published in accordance with Brindoval's standard publication procedures.
1.6 Ongoing Surveillance
Following the initial rating assignment, Brindoval will monitor the Rated Notes on an ongoing basis through the Stated Maturity Date of October 15, 2036, or until such earlier date on which all Rated Notes are redeemed, paid in full, or all ratings assigned hereunder are withdrawn in accordance with Brindoval's published policies and procedures.
Ongoing surveillance will include, without limitation, periodic review of (i) quarterly trustee reports prepared by the collateral administrator, (ii) collateral performance data, including default rates, recovery rates, and delinquency information, (iii) results of overcollateralization ("O/C") tests and interest coverage ("I/C") tests for each rated class, (iv) collateral quality metrics, including compliance with the Weighted Average Rating Factor, Weighted Average Spread, Weighted Average Life, Diversity Score, and concentration limits set forth in the Indenture, (v) trading activity and portfolio turnover, and (vi) any other information Brindoval deems relevant to the ongoing credit assessment of the Rated Notes.
Brindoval may, in its sole discretion and in accordance with its published policies and applicable NRSRO regulations, affirm, upgrade, downgrade, place on credit watch, or withdraw any rating assigned to the Rated Notes at any time based on its ongoing surveillance and analytical assessment.
Section 2: Key Transaction Participants
2.1 Issuer. Driftwood CLO 2023-I, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (Registration No. EX-382916). The Issuer has been organized as a special purpose entity for the purpose of issuing the Notes and acquiring the collateral obligations that will comprise the collateral pool for the Transaction.
2.2 Co-Issuer. Driftwood CLO 2023-I, LLC, a limited liability company organized under the laws of the State of Delaware (DE File No. 7429831). The Co-Issuer has been organized as a special purpose entity for the sole purpose of co-issuing the Notes with the Issuer.
2.3 Collateral Manager
Driftwood Credit Management LLC ("DCM"), a limited liability company organized under the laws of the State of Delaware. DCM is a SEC-registered investment adviser (CRD #182447) and will act as the collateral manager for the Transaction pursuant to a Collateral Management Agreement entered into in connection with the Indenture.
Principal Office: 200 Brickell Avenue, Suite 3100, Miami, FL 33131 Key Contact: David Hwan, Managing Director, Structured Credit
2.4 Trustee / Collateral Administrator
Ironclad Trust Company, N.A., a national banking association, acting as Trustee and collateral administrator under the Indenture.
Address: 100 Wall Street, Suite 1650, New York, NY 10005
Key Contact: Catherine Nowak, Vice President, Corporate Trust
2.5 Placement Agent
Meridian Atlantic Securities LLC (lead placement agent), 383 Madison Avenue, 22nd Floor, New York, NY 10179.
Northbridge Capital Markets Inc. (co-placement agent).
Brindoval acknowledges that it has no contractual or advisory relationship with either placement agent in connection with this Transaction.
2.6 Issuer's Counsel
Calderwood & Harkness LLP, 450 Park Avenue, New York, NY 10022. Calderwood & Harkness LLP serves as counsel to the Issuer and the Collateral Manager in connection with the Transaction.
2.7 Brindoval Key Personnel
The following individuals have been designated as Brindoval's key personnel for this engagement:
• Anita Delgado, Senior Director, Structured Finance Ratings — engagement lead, responsible for overall engagement management and communication with the Issuer and its counsel.
• Brian Whitford, Lead Analyst, CLO Group — primary analyst, responsible for conducting the credit analysis and ongoing surveillance of the Rated Notes.
Brindoval reserves the right to reassign personnel as it deems necessary in its sole discretion. Any material change in key personnel will be communicated to the Issuer in a timely manner.
Section 3: Rating Methodology and Analytical Process
3.1 Applicable Criteria
Brindoval will apply its published CLO rating methodology and criteria (collectively, the "Methodology"), as updated from time to time, in assigning and surveilling the ratings on the Rated Notes. The Methodology incorporates quantitative cash-flow modeling, stress testing, qualitative assessment of the Collateral Manager's capabilities, and evaluation of the legal and structural features of the Transaction. A copy of the current Methodology is publicly available on Brindoval's website.
Key analytical inputs, as specified in the Indenture and incorporated into Brindoval's analysis, include the following:
• Minimum Weighted Average Rating Factor (WARF): 2,850 per Brindoval's published rating scale
• Minimum Weighted Average Recovery Rate: 45.0%
• Minimum Diversity Score: 60
• Minimum Weighted Average Spread: 350 basis points
• Maximum Weighted Average Life: 7.5 years
• Maximum CCC-Rated Obligation Bucket: 7.5% of the aggregate principal balance of the collateral pool ($30,000,000)
• Maximum Second-Lien Obligation Bucket: 5.0% of the aggregate principal balance of the collateral pool ($20,000,000)
• Maximum Fixed-Rate Obligation Bucket: 10.0% of the aggregate principal balance of the collateral pool ($40,000,000)
These parameters serve as credit quality thresholds that the Collateral Manager is required to satisfy, and Brindoval will monitor compliance with these parameters as part of its ongoing surveillance process. Changes to Brindoval's published Methodology may affect the analytical inputs and rating outcomes; Brindoval will apply any such changes in accordance with its published criteria change policies.
3.2 Structural Features Reviewed
Brindoval's initial and ongoing analysis encompasses a review of the following structural features of the Transaction, as set forth in the Indenture:
Priority of Payments Waterfall. The Indenture establishes a detailed priority of payments waterfall governing the distribution of interest proceeds and principal proceeds. Brindoval's analysis includes an assessment of the adequacy of the waterfall structure under various stress scenarios, including scenarios involving defaults, prepayments, and reinvestment assumptions.
Overcollateralization Tests. The Indenture establishes the following O/C test trigger levels for each rated class:
Interest Coverage Tests. The Indenture establishes the following I/C test trigger levels for each rated class:
Failure of any O/C test or I/C test triggers certain diversion and acceleration mechanisms designed to protect the interests of the senior noteholders, as more fully described in the Indenture.
Non-Call Period. The Rated Notes are subject to a non-call period of two (2) years from the Closing Date (September 12, 2023), ending on September 12, 2025. During the non-call period, the Rated Notes may not be optionally redeemed.
Reinvestment Period. The Collateral Manager is permitted to reinvest principal proceeds in substitute collateral obligations during a reinvestment period of five (5) years from the Closing Date, ending on September 12, 2028. Following the end of the reinvestment period, principal proceeds will be applied to amortize the Rated Notes in accordance with the priority of payments waterfall.
Stated Maturity. The Stated Maturity Date for the Rated Notes is October 15, 2036.
Reference Rate. Interest on the Rated Notes accrues at a floating rate equal to Compounded SOFR (Secured Overnight Financing Rate) plus the applicable spread for each class, calculated on an Actual/360 day-count basis.
Subordination Levels. The following initial subordination levels provide credit enhancement to each rated class:
3.3 Rating Agency Presentations
The initial rating agency presentation to Brindoval was conducted by the Collateral Manager, Driftwood Credit Management LLC, on June 12, 2023. The presentation covered, among other topics, DCM's investment management platform, portfolio construction strategy, historical performance of prior CLO vehicles managed by DCM, and the proposed structure and terms of the Transaction.
Brindoval's rating agency model review, which included a detailed quantitative analysis of the proposed collateral pool and transaction structure using Brindoval's proprietary cash-flow models, was completed on July 28, 2023.
Preliminary ratings on the Rated Notes were issued by Brindoval on August 4, 2023, and were communicated to the Issuer, the Collateral Manager, and their counsel, as well as to the lead placement agent.
3.4 Ratings Are Opinions
The Issuer acknowledges and agrees that Brindoval's credit ratings constitute forward-looking opinions on the creditworthiness of the Rated Notes and are not statements of fact. Brindoval's ratings address only the likelihood of timely payment of interest and ultimate payment of principal on the Rated Notes, subject to the assumptions and limitations described in Brindoval's published Methodology and the rating rationale for this Transaction.
Brindoval's ratings are not recommendations to purchase, sell, or hold any securities. The ratings do not address market value, liquidity, the price at which any note may trade in the secondary market, or the suitability of any note for any particular investor. Investors should conduct their own due diligence and independent analysis before making any investment decision with respect to the Rated Notes.
Section 4: Rating Fees
4.1 Initial Rating Fee
In consideration of Brindoval's assignment of initial credit ratings on the Rated Notes, the Issuer shall pay to Brindoval a one-time initial rating fee (the "Initial Rating Fee") upon the assignment of final ratings. The Initial Rating Fee shall be calculated as 4.0 basis points (0.04%) on the aggregate principal amount of the Rated Notes ($364,000,000), resulting in an Initial Rating Fee of $145,600.
The Initial Rating Fee shall be payable within thirty (30) days of the date of Brindoval's invoice, which shall be issued on or promptly following the Pricing Date. The Initial Rating Fee is non-refundable and is fully earned upon assignment of the final ratings.
4.2 Annual Surveillance Fee
In consideration of Brindoval's ongoing surveillance of the Rated Notes, the Issuer shall pay to Brindoval an annual surveillance fee (the "Annual Surveillance Fee") on each anniversary of the date of initial rating assignment, commencing on the first anniversary thereof.
The Annual Surveillance Fee shall be $52,000 per annum, payable in advance. The Annual Surveillance Fee shall be invoiced annually, with the first invoice to be issued on or about the first anniversary of the initial rating assignment date.
In the event that the engagement commences or terminates on a date other than an anniversary date, the Annual Surveillance Fee shall be pro-rated for any partial year on the basis of actual days elapsed divided by 365 (or 366, as applicable).
The Annual Surveillance Fee shall continue to be payable until the earliest of: (a) the date on which all Rated Notes have been paid in full or redeemed, (b) the date on which all ratings assigned hereunder have been withdrawn by Brindoval, or (c) the Stated Maturity Date (October 15, 2036).
4.3 Fee Adjustments
Brindoval reserves the right to adjust the Annual Surveillance Fee from time to time, provided that (i) any such adjustment is consistent with Brindoval's published fee schedule then in effect, and (ii) Brindoval provides the Issuer with not less than ninety (90) days' prior written notice of any such adjustment, specifying the new fee amount and the effective date thereof. The Issuer shall have the right to terminate this Engagement Letter in accordance with Section 9.2(d) in the event that it does not agree with any proposed fee adjustment.
4.4 Taxes. All fees set forth in this Section 4 are exclusive of any and all applicable taxes, including, without limitation, value-added tax, goods and services tax, sales tax, and any withholding taxes imposed by any governmental authority. The Issuer shall be solely responsible for the payment of any such taxes. In the event that the Issuer is required by law to deduct or withhold any taxes from payments to Brindoval, the Issuer shall gross up such payments so that Brindoval receives the full amount of the fees specified herein after giving effect to any such deductions or withholdings.
4.5 Payment Instructions
Brindoval will provide detailed wire transfer instructions with each invoice. Payments shall be made in United States dollars by wire transfer of immediately available funds to the account designated by Brindoval. Late payments shall accrue interest at the rate of 1.0% per month (or the maximum rate permitted by applicable law, if less) from the due date until paid in full.
Section 5: Information Undertakings
5.1 Issuer's Obligations
The Issuer (and/or the Collateral Manager, Driftwood Credit Management LLC, on the Issuer's behalf) agrees to provide Brindoval with the following information and documents in a timely manner to enable Brindoval to perform its rating and surveillance obligations hereunder:
(a) Transaction Documents. Complete copies of the Indenture dated August 22, 2023, any supplements thereto (including, without limitation, the First Supplemental Indenture dated September 8, 2023, and any subsequent supplements), the Collateral Management Agreement, the Collateral Administration Agreement, the Offering Memorandum dated August 18, 2023, and all other material transaction documents, including any side letters or ancillary agreements, in each case promptly upon execution.
(b) Quarterly Trustee Reports. Quarterly trustee reports prepared by Ironclad Trust Company, N.A. in its capacity as collateral administrator, including, without limitation, coverage test results (both O/C and I/C tests for each rated class), collateral quality test compliance results, portfolio stratification data (by industry, rating, maturity, and other relevant characteristics), and such other information as is customarily included in CLO trustee reports. Such reports shall be delivered to Brindoval within thirty (30) days of each Payment Date. Payment Dates occur quarterly on January 15, April 15, July 15, and October 15 of each year.
(c) Monthly Collateral Pool Data. Monthly collateral pool data files in Brindoval's standard electronic format (or such other format as Brindoval may reasonably specify from time to time), including obligor-level data, credit ratings, par amounts, market values (if available), maturities, and spreads.
(d) Event of Default Notice. Prompt written notice of any Event of Default under the Indenture, any failure of any coverage test (O/C or I/C), or any material adverse change in the composition or credit quality of the collateral pool.
(e) Collateral Manager Changes. Prompt written notice of any change in the Collateral Manager, including, without limitation, any removal of the Collateral Manager for cause or any resignation of the Collateral Manager, together with information regarding any proposed replacement collateral manager.
(f) Amendments and Waivers. Copies of any proposed or executed amendments, waivers, consents, or supplements to the Indenture or any other material transaction document, promptly upon execution or, in the case of proposed amendments, sufficiently in advance of execution to permit Brindoval to evaluate the potential rating impact thereof.
(g) Redemption, Refinancing, and Repricing Notices. Prompt written notice of any optional redemption, mandatory redemption, refinancing, or repricing of the Rated Notes, together with copies of any related notices delivered to noteholders or the Trustee.
(h) Effective Date Compliance Certificate. An Effective Date compliance certificate, certifying compliance with all Effective Date conditions set forth in the Indenture, to be delivered no later than December 12, 2023 (being ninety (90) days following the Pricing Date).
5.2 Collateral Manager Cooperation
Driftwood Credit Management LLC, in its capacity as Collateral Manager for the Transaction, agrees to cooperate fully with Brindoval's surveillance process. Without limiting the generality of the foregoing, the Collateral Manager agrees to (i) make David Hwan, Managing Director, Structured Credit, and other relevant investment professionals available for periodic calls with Brindoval's analytical team at mutually convenient times, (ii) respond to information requests from Brindoval in a timely manner, and (iii) provide Brindoval with any additional information reasonably requested by Brindoval's analysts in connection with their ongoing surveillance of the Rated Notes.
5.3 Trustee Data
The Issuer shall direct Ironclad Trust Company, N.A., in its capacities as Trustee and collateral administrator under the Indenture, to provide Brindoval with direct electronic access to all trustee reports and portfolio data generated in connection with the Transaction. Such access shall be provided on a continuous basis throughout the term of this Engagement Letter, and shall include, without limitation, access to any web-based trustee reporting platform maintained by Ironclad Trust Company, N.A. for the benefit of the noteholders and the rating agencies.
5.4 Consequences of Failure to Provide Information
In the event that the Issuer or the Collateral Manager fails to provide the information required under this Section 5 within the time periods specified herein (or, where no specific time period is specified, within a commercially reasonable time following Brindoval's request), Brindoval reserves the right, in its sole discretion and in accordance with its published policies and applicable NRSRO regulations, to take one or more of the following actions:
(a) Place one or more of the ratings on credit watch (positive, negative, or developing, as appropriate);
(b) Suspend one or more of the ratings pending receipt of the required information; or
(c) Withdraw one or more of the ratings.
Prior to taking any such action, Brindoval will use commercially reasonable efforts to notify the Issuer and the Collateral Manager of its intention to take such action and to provide a reasonable opportunity to cure the information deficiency. However, Brindoval shall not be required to delay any rating action if, in Brindoval's judgment, such delay would be inconsistent with its obligations as an NRSRO or would compromise the integrity of the rating process.
Section 6: Confidentiality
6.1 Confidential Information Defined
For purposes of this Engagement Letter, "Confidential Information" means all non-public information provided to Brindoval by or on behalf of the Issuer, the Co-Issuer, the Collateral Manager, or their respective counsel, advisors, or agents in connection with this engagement, including, without limitation, (i) portfolio-level data, loan-level data, and other collateral pool information not publicly available, (ii) financial projections, models, and analyses, (iii) draft transaction documents and preliminary term sheets, (iv) internal memoranda, investment committee materials, and other proprietary documents of the Collateral Manager, (v) information regarding proposed amendments, waivers, or restructurings of transaction documents, and (vi) any other information that is expressly designated in writing as "Confidential" by the party providing such information at the time of disclosure.
Confidential Information does not include information that (a) is or becomes publicly available other than through a breach of this Engagement Letter, (b) was known to Brindoval prior to its disclosure by or on behalf of the Issuer, (c) is independently developed by Brindoval without reference to the Confidential Information, or (d) is received by Brindoval from a third party that is not, to Brindoval's knowledge, bound by a confidentiality obligation with respect to such information.
6.2 Brindoval's Obligations
Brindoval will maintain the confidentiality of Confidential Information and will not disclose Confidential Information to any third party, except in the following circumstances:
(a) Regulatory Obligations. Brindoval may disclose Confidential Information as required by applicable law, regulation, or legal process, including, without limitation, in response to requests or demands from the SEC in connection with NRSRO examinations or investigations, or as otherwise required under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(b) Internal Use. Brindoval may disclose Confidential Information to its employees, consultants, and affiliates who have a need to know such information in connection with the rating process, provided that such individuals are subject to Brindoval's internal confidentiality policies and procedures, which are designed to be consistent with applicable NRSRO regulations.
(c) Published Ratings and Research. Brindoval may reference or describe certain transaction characteristics in connection with the publication of ratings, rating actions, press releases, pre-sale reports, surveillance reports, and other research publications, provided that such publications do not disclose Confidential Information beyond what is customary and appropriate for published CLO rating reports.
6.3 Issuer's Acknowledgment Regarding Published Ratings
The Issuer acknowledges and agrees that Brindoval's credit ratings, once assigned, will be made publicly available and may be disseminated through Brindoval's website, electronic data feeds, press releases, and other publication channels. The Issuer hereby consents to the publication and dissemination of the ratings and any related rating rationale, including pre-sale reports, new issue reports, and surveillance commentaries. The Issuer further acknowledges that Brindoval may publish rating actions (including affirmations, upgrades, downgrades, credit watch placements, and withdrawals) at any time and without the prior consent of the Issuer.
6.4 Regulatory Disclosure
Notwithstanding any other provision of this Section 6, Brindoval may disclose Confidential Information to the SEC, the Financial Industry Regulatory Authority ("FINRA"), or other governmental or regulatory authorities as required under applicable NRSRO regulations, without prior notice to or consent of the Issuer. Brindoval shall not be liable to the Issuer or any other party for any disclosure made in compliance with applicable law or regulatory requirements.
6.5 Survival. The confidentiality obligations set forth in this Section 6 shall survive the termination or expiration of this Engagement Letter for a period of two (2) years following the date of such termination or expiration.
Section 7: Representations and Warranties
7.1 Issuer's Representations
The Issuer hereby represents and warrants to Brindoval, as of the date of execution of this Engagement Letter and as of each date on which information is provided to Brindoval hereunder, as follows:
(a) Organization and Existence. The Issuer is duly organized, validly existing, and in good standing (to the extent applicable) under the laws of the Cayman Islands (Registration No. EX-382916) and has all requisite corporate power and authority to carry on its business as presently conducted and to own its assets.
(b) Authority. The Issuer has full corporate power and authority to enter into this Engagement Letter and to perform its obligations hereunder. The execution, delivery, and performance of this Engagement Letter by the Issuer have been duly authorized by all necessary corporate action on the part of the Issuer, and this Engagement Letter constitutes a valid and binding obligation of the Issuer, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, and similar laws affecting creditors' rights generally and to general principles of equity.
(c) Accuracy of Information. All information provided by or on behalf of the Issuer to Brindoval in connection with the rating process, including, without limitation, information regarding the collateral pool, the Transaction structure, the Collateral Manager, and the terms and conditions of the transaction documents, is, to the best of the Issuer's knowledge and belief, true, complete, and accurate in all material respects as of the date such information is provided.
(d) Duty to Update. The Issuer will promptly notify Brindoval in writing of any material inaccuracy in, or material omission from, information previously provided to Brindoval, and will provide such corrected or supplemental information as may be necessary to ensure the continued accuracy of the information provided.
7.2 Brindoval's Representations
Brindoval hereby represents and warrants to the Issuer, as of the date of execution of this Engagement Letter, as follows:
(a) Organization and Registration. Brindoval is a corporation duly organized and validly existing under the laws of the State of Delaware and is registered as a nationally recognized statistical rating organization (NRSRO) with the SEC pursuant to Section 15E of the Securities Exchange Act of 1934, as amended.
(b) Methodology. Brindoval will assign and maintain the ratings on the Rated Notes in accordance with its published methodologies, criteria, and procedures, and in compliance with all applicable NRSRO regulatory requirements, including, without limitation, the requirements of Rule 17g-1 through Rule 17g-10 under the Securities Exchange Act of 1934, as amended.
(c) Conflicts of Interest. Brindoval's analytical personnel are subject to, and comply with, Brindoval's internal policies and procedures regarding conflicts of interest, independence, and ethical conduct, which are designed to ensure the integrity and objectivity of Brindoval's rating process.
Section 8: Limitation of Liability and Disclaimers
8.1 No Guarantee
The Issuer acknowledges and agrees that Brindoval's credit ratings are opinions regarding the creditworthiness of the Rated Notes and do not constitute guarantees of credit quality, default probability, or the future performance of the Rated Notes. Brindoval's ratings reflect Brindoval's analytical assessment at the time the ratings are assigned or most recently updated, and are subject to change at any time based on new information or changed circumstances. Brindoval does not audit, and assumes no obligation to audit or independently verify, the accuracy, completeness, or reliability of the information provided to Brindoval by the Issuer, the Collateral Manager, the Trustee, or any other party. Brindoval relies on the accuracy of such information in conducting its analysis and assigning its ratings.
8.2 Limitation of Liability
To the fullest extent permitted by applicable law, Brindoval's aggregate liability under this Engagement Letter, whether arising in contract, tort (including negligence), strict liability, or otherwise, shall not exceed the total amount of fees actually paid by the Issuer to Brindoval under this Engagement Letter. In no event shall Brindoval be liable to the Issuer, the Co-Issuer, the Collateral Manager, any noteholder, or any other person or entity for any consequential, incidental, indirect, special, exemplary, or punitive damages of any kind, including, without limitation, lost profits, loss of business, loss of revenue, or loss of anticipated savings, arising out of or in connection with this Engagement Letter or the assignment, maintenance, modification, or withdrawal of any rating, regardless of whether such damages were foreseeable or whether Brindoval was advised of the possibility of such damages.
8.3 No Fiduciary Duty
Brindoval does not owe, and shall not be deemed to owe, any fiduciary duty, duty of care, or duty of loyalty to the Issuer, the Co-Issuer, the Collateral Manager, any noteholder, the Trustee, any placement agent, or any other person or entity in connection with this engagement. The Issuer acknowledges that Brindoval acts solely as an independent credit rating agency, and that the relationship between the parties is solely a contractual relationship on the terms set forth herein. Nothing in this Engagement Letter shall be construed to create an agency, partnership, joint venture, or other fiduciary relationship between the parties.
8.4 Reliance by Third Parties
This Engagement Letter is entered into solely for the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Engagement Letter, express or implied, is intended to or shall be construed to confer upon any third party (including, without limitation, any noteholder, the Trustee, any placement agent, any investor, or any other person or entity) any rights, benefits, or remedies of any kind. No third party shall be entitled to rely upon this Engagement Letter or to bring any claim against Brindoval arising out of or in connection with this Engagement Letter.
Section 9: Term and Termination
9.1 Effective Date
This Engagement Letter shall become effective upon execution by both parties hereto (the "Effective Date"). In the event that this Engagement Letter is executed in counterparts, the Effective Date shall be the date on which the last counterpart is executed.
9.2 Term. This Engagement Letter shall remain in full force and effect until the earliest of the following:
(a) The date on which all ratings assigned to the Rated Notes hereunder have been withdrawn by Brindoval in accordance with its published policies and procedures;
(b) The date on which all Rated Notes have been paid in full or redeemed in accordance with the terms of the Indenture;
(c) The Stated Maturity Date (October 15, 2036); or
(d) The date specified in a written notice of termination delivered by either party to the other party not less than ninety (90) days prior to the proposed effective date of termination.
9.3 Effect of Termination
Upon termination or expiration of this Engagement Letter, Brindoval may, in its sole discretion and in accordance with its published policies and applicable NRSRO regulations, either (a) withdraw the ratings on the Rated Notes, or (b) continue to maintain the ratings based on publicly available information and without the benefit of the information undertakings set forth in Section 5 hereof. The Issuer acknowledges that Brindoval's decision to maintain or withdraw the ratings following termination shall be made in Brindoval's sole discretion and shall not require the consent of the Issuer.
Termination or expiration of this Engagement Letter shall not affect (i) any fees accrued but unpaid as of the date of termination, (ii) the survival provisions set forth herein, including, without limitation, the confidentiality obligations under Section 6, the limitation of liability provisions under Section 8, the indemnification obligations under Section 11, and any other provision that by its nature is intended to survive termination.
9.4 Outstanding Fee Obligations
All fees accrued through the effective date of termination shall remain payable by the Issuer in accordance with the terms of Section 4 hereof. Termination shall not relieve the Issuer of its obligation to pay any amounts due and owing as of the date of termination.
Section 10: Conflicts of Interest
10.1 Brindoval's Policies
Brindoval maintains comprehensive internal policies and procedures designed to identify, manage, mitigate, and disclose conflicts of interest in connection with its credit rating activities. These policies and procedures are designed to comply with the requirements of SEC regulations governing NRSROs, including, without limitation, Rule 17g-5 and other applicable provisions under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Among other measures, Brindoval's analytical personnel are strictly prohibited from participating in fee negotiations, commercial discussions, or business development activities with the Issuer, the Collateral Manager, or any other party involved in the Transaction. All fee-related discussions are conducted by Brindoval's commercial and client relations team, which operates independently of the analytical function. Brindoval's compliance department regularly monitors adherence to these separation requirements.
10.2 Disclosure. In the event that Brindoval identifies a material conflict of interest in connection with this engagement, Brindoval will promptly disclose such conflict to the Issuer and will take such measures as are appropriate and consistent with Brindoval's internal policies and procedures and applicable law to address such conflict. Such measures may include, among other things, the recusal of conflicted personnel, the assignment of alternative analytical personnel, or, in extreme cases, the withdrawal of the ratings. Brindoval's Form NRSRO and related annual disclosures, which include information regarding Brindoval's conflict of interest policies and procedures, are publicly available on Brindoval's website and on the SEC's website.
Section 11: Indemnification
11.1 Issuer's Indemnification
The Issuer agrees to indemnify, defend, and hold harmless Brindoval and its directors, officers, employees, agents, and affiliates (collectively, the "Brindoval Indemnified Parties") from and against any and all losses, claims, damages, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees and expenses, court costs, and costs of investigation) (collectively, "Losses") arising out of or relating to:
(a) Any material misstatement or omission in, or material inaccuracy of, any information provided by or on behalf of the Issuer, the Collateral Manager, or their respective agents or representatives to Brindoval in connection with the rating process, including, without limitation, information regarding the collateral pool, the Transaction structure, or the financial condition of the Issuer or the Collateral Manager; or
(b) Any breach by the Issuer of any of its representations, warranties, covenants, or obligations under this Engagement Letter.
The Issuer's indemnification obligations under this Section 11.1 shall survive the termination or expiration of this Engagement Letter.
11.2 Exceptions. Notwithstanding the foregoing, the Issuer's indemnification obligations under Section 11.1 shall not extend to any Losses to the extent that such Losses are determined by a court of competent jurisdiction, in a final non-appealable judgment, to have resulted directly from Brindoval's gross negligence, willful misconduct, or material breach of its confidentiality obligations under Section 6 of this Engagement Letter.
Section 12: Notices
All notices, requests, demands, consents, and other communications required or permitted under this Engagement Letter shall be addressed as follows:
12.1 To Brindoval
Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041
Attention: Anita Delgado, Senior Director, Structured Finance Ratings
Email: adelgado@crestviewratings.com
With a copy to: Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041
Attention: Legal Department
Email: legal@crestviewratings.com
12.2 To the Issuer
Driftwood CLO 2023-I, Ltd. c/o Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100 Miami, FL 33131
Attention: David Hwan, Managing Director, Structured Credit
Email: dhwan@driftwoodcredit.com