1024-00004 · Client 1024 · Rating Agency Process

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BRINDOVAL ANALYTICAL SERVICES INC. 55 Water Street, 40th Floor New York, NY 10041

Delaware Corporation — Nationally Recognized Statistical Rating Organization Registered with the U.S. Securities and Exchange Commission

September 8, 2023

Driftwood CLO 2023-I, Ltd. PO Box 4927, Windward House, 3rd Floor George Town, Grand Cayman KY1-1306 Cayman Islands

With copies to:

Driftwood CLO 2023-I, LLC c/o National Registered Agents Inc. 1209 Orange Street Wilmington, DE 19801

Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100 Miami, FL 33131

Ironclad Trust Company, N.A. (as Trustee) 100 Wall Street, Suite 1650 New York, NY 10005

Attention: Catherine Nowak, Vice President, Corporate Trust

Meridian Atlantic Securities LLC (as Lead Placement Agent) 383 Madison Avenue, 22nd Floor New York, NY 10179

Attention: Jonathan Halevy, Managing Director, CLO Structuring & Origination

Calderwood & Harkness LLP (as Issuer's Counsel) 450 Park Avenue New York, NY 10022

Attention: Samuel Eklund

Re: Driftwood CLO 2023-I — Confirmation of Final Ratings on Secured Notes

Ladies and Gentlemen:

Reference is hereby made to the engagement letter dated June 14, 2023 (the "Engagement Letter"), between Brindoval Analytical Services Inc. ("Brindoval," "we," or "us") and Driftwood CLO 2023-I, Ltd. (the "Issuer"), pursuant to which Brindoval was engaged to assign and conduct ongoing surveillance of credit ratings in connection with the transaction described herein. Capitalized terms used but not otherwise defined in this letter shall have the meanings ascribed to them in the Indenture (as defined below) or the Offering Memorandum (as defined below), as applicable.

This letter confirms the final ratings assigned by Brindoval to certain classes of secured notes (the "Rated Notes") issued in connection with the issuance by Driftwood CLO 2023-I, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the "Issuer"), and Driftwood CLO 2023-I, LLC, a Delaware limited liability company (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers"), of $400,000,000 in aggregate principal amount of secured notes and subordinated notes (collectively, the "Notes"). The Notes were issued 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"). Reference is also made to the Offering Memorandum dated August 18, 2023 (the "Offering Memorandum") and the Note Purchase Agreement dated September 8, 2023 (the "Note Purchase Agreement"), each relating to the offering and sale of the Notes.

Brindoval has completed its analysis of the transaction and hereby confirms the final ratings assigned to the Rated Notes in connection with the pricing of the Notes on the date hereof (September 8, 2023). The basis for such ratings, the key structural features reviewed, and applicable conditions, assumptions, and limitations are set forth below.

1. Final Ratings

1.1 Ratings Assigned

Brindoval Analytical Services Inc. has assigned the following final ratings to the classes of secured notes described below, each issued by the Co-Issuers pursuant to the Indenture:

The Class A-1 Notes offered pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), bear CUSIP G2694LAA7. The Class A-1 Notes offered pursuant to Rule 144A under the Securities Act bear CUSIP 26738TAA5 and ISIN US26738TAA51. The Regulation S notes of the Class A-1 Notes carry the same Brindoval rating as the corresponding Rule 144A tranche set forth above. The foregoing CUSIPs and ISINs apply to the respective tranches as indicated in the Offering Memorandum, and the ratings apply irrespective of the form of offering.

The total aggregate principal amount of Rated Notes is $364,000,000.

The Subordinated Notes (CUSIP 26738TAF4), having an aggregate principal amount of $36,000,000, are not rated by Brindoval Analytical Services Inc. and are expressly excluded from this rating confirmation. Brindoval expresses no opinion regarding the creditworthiness, expected returns, or risk characteristics of the Subordinated Notes.

1.2 Confirmation of Dual Rating

Brindoval acknowledges that the above-listed classes of Rated Notes are also rated by Ridgeline Credit Ratings LLC, another nationally recognized statistical rating organization. Brindoval's ratings have been assigned independently, based solely on Brindoval's proprietary methodologies, analytical frameworks, and criteria. Brindoval has not consulted with, referenced, or otherwise relied upon the ratings or analysis of Ridgeline Credit Ratings LLC, and no inference should be drawn from any similarity or difference between the respective ratings assigned by each agency. The ratings of Brindoval and the ratings of Ridgeline Credit Ratings LLC are determined using distinct methodologies and may not be directly comparable.

2. Transaction Summary and Key Structural Features Reviewed

2.1 Transaction Structure

The transaction is structured as a broadly syndicated cash-flow collateralized loan obligation ("CLO") backed by a managed portfolio composed primarily of broadly syndicated first-lien senior secured leveraged loans. The obligors underlying such loans are predominantly domiciled in the United States, although the collateral eligibility criteria permit limited exposure to non-U.S. obligors as more fully described in the Offering Memorandum and the Indenture. The target portfolio par amount is $400,000,000.

The portfolio is managed by Driftwood Credit Management LLC (the "Collateral Manager"), a Delaware limited liability company registered as an investment adviser with the U.S. Securities and Exchange Commission (CRD #182447). The Collateral Manager acts pursuant to a Collateral Management Agreement dated as of August 22, 2023 (the "Collateral Management Agreement"), among the Issuer, the Co-Issuer, and the Collateral Manager. In conducting its analysis, Brindoval reviewed the investment management capabilities, organizational structure, risk management processes, and historical performance of the Collateral Manager's CLO platform, including the track records and qualifications of the following key investment professionals:

• Marcus Sorensen, Founder & Chief Investment Officer, who has over 22 years of experience in leveraged finance and structured credit and is responsible for overall investment strategy and portfolio oversight; and

• David Hwan, Managing Director, Structured Credit, who serves as the designated portfolio manager for the Collateral Manager's CLO platform and has primary day-to-day responsibility for collateral selection, trading, and compliance monitoring for the Driftwood CLO program.

Brindoval's evaluation of the Collateral Manager is an integral component of its CLO rating methodology. The assessment included a review of the Collateral Manager's historical default rates, loss-given-default experience, portfolio turnover, and adherence to stated investment guidelines across prior CLO vehicles managed by the Collateral Manager.

2.2 Capital Structure

The capital structure of the transaction, as reflected in the Indenture and the Offering Memorandum, is summarized as follows:

All floating-rate notes are indexed to Compounded SOFR, as described in Section 2.4 below. The Subordinated Notes represent the residual equity interest in the transaction and are entitled to distributions only after all obligations to the Rated Notes have been satisfied in accordance with the priority of payments waterfall set forth in the Indenture.

2.3 Key Subordination Levels

The subordination levels available to each class of Rated Notes, calculated as the aggregate principal amount of all classes of Notes junior to the applicable class (including the Subordinated Notes) expressed as a percentage of total capital structure par, are 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%

These subordination levels represent a key element of the credit enhancement supporting each class of Rated Notes and were a significant factor in Brindoval's determination of the final ratings. The subordination levels are designed to provide each class of Rated Notes with protection against credit losses in the underlying collateral portfolio commensurate with the assigned rating.

2.4 Key Structural Protections

Brindoval reviewed the following key structural protections and features of the transaction, each as set forth in the Indenture:

Reference Rate. The reference rate for all floating-rate notes is Compounded SOFR, calculated in accordance with the ARRC-recommended "26253" lookback-without-observation-shift fallback convention. The day count convention applicable to all interest calculations is Actual/360. The Indenture contains customary fallback provisions for the determination of a successor reference rate in the event that Compounded SOFR is no longer available or representative.

Overcollateralization Tests. The Indenture provides for the following overcollateralization ("O/C") tests, which are measured on each determination date based on the par value of the collateral portfolio relative to the outstanding principal balance of the applicable classes of Rated Notes:

• Class A O/C Test: 128.00%

• Class B O/C Test: 118.00%

• Class C O/C Test: 110.00%

• Class D O/C Test: 105.50%

Failure to satisfy any O/C test on a payment date will result in the redirection of interest and principal proceeds in accordance with the priority of payments waterfall, with excess proceeds applied to the redemption of the most senior outstanding class of Rated Notes until such test is restored to compliance.

Interest Coverage Tests. The Indenture provides for the following interest coverage ("I/C") tests, which measure the ratio of interest proceeds from the collateral portfolio to the interest obligations on the applicable classes of Rated Notes:

• Class A I/C Test: 120.00%

• Class B I/C Test: 115.00%

• Class C I/C Test: 110.00%

• Class D I/C Test: 105.00%

Similar to the O/C tests, failure to satisfy any I/C test on a payment date will result in the redirection of proceeds in accordance with the priority of payments waterfall as specified in the Indenture.

Non-Call Period. The 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 Issuer may not optionally redeem any class of Rated Notes (other than in connection with a tax redemption or clean-up call as permitted under the Indenture).

Reinvestment Period. The Collateral Manager is authorized to reinvest principal proceeds received from the collateral portfolio during the reinvestment period, which extends for five (5) years from the Closing Date, ending on September 12, 2028. Following the expiration of the reinvestment period, principal proceeds will generally be applied to the sequential redemption of the Rated Notes in accordance with their priority.

Stated Maturity. The stated maturity date for all classes of Notes is October 15, 2036, which represents the date by which all principal and accrued interest on the Rated Notes must be paid in full.

Payment Dates. Payments of interest and principal on the Notes are made quarterly on the 15th day of January, April, July, and October of each year, subject to the business day convention. The first payment date is January 15, 2024.

2.5 Collateral Eligibility Criteria Reviewed

Brindoval reviewed the collateral eligibility criteria and portfolio quality tests set forth in the Indenture, which govern the composition and quality of the collateral portfolio throughout the life of the transaction. The key parameters reviewed include the following:

• Minimum Weighted Average Spread: 350 basis points

• Maximum Weighted Average Life: 7.5 years

• Minimum Diversity Score: 60

• Maximum CCC Bucket: 7.5% of aggregate collateral par amount ($30,000,000 based on the target par amount)

• Maximum Second-Lien Bucket: 5.0% of aggregate collateral par amount ($20,000,000 based on the target par amount)

• Maximum Fixed-Rate Bucket: 10.0% of aggregate collateral par amount ($40,000,000 based on the target par amount)

• Minimum Weighted Average Recovery Rate: 45.0%

• Minimum Weighted Average Rating Factor (WARF): 2,850 (calculated using the Brindoval rating factor scale)

These collateral eligibility criteria and portfolio quality tests are designed to maintain a minimum level of credit quality, diversification, and structural integrity in the collateral portfolio over the life of the transaction. Compliance with these tests is monitored on each determination date by the Collateral Administrator and reported to the Trustee.

2.6 Effective Date

The Effective Date for the transaction is required to occur no later than December 12, 2023, which is ninety (90) days following the pricing date. On the Effective Date, the Issuer must demonstrate compliance with all collateral quality tests, coverage tests, and concentration limitations set forth in the Indenture, based on the composition of the collateral portfolio as of such date.

The final ratings confirmed herein are subject to the Issuer satisfying the Effective Date conditions by the Effective Date deadline. In the event that the Effective Date conditions are not satisfied by December 12, 2023, Brindoval reserves the right to review, and potentially withdraw, lower, or place on credit watch, the ratings assigned to the Rated Notes.

3. Basis of Ratings

The final ratings set forth in Section 1 above are based on Brindoval's comprehensive analysis of the following factors:

(a) The credit quality of the collateral pool, including the credit risk profile of the individual obligors, industry and geographic diversification, weighted average rating factor, recovery rate assumptions, and default probability distributions applicable to the portfolio;

(b) The structural features of the transaction, including the priority of payments waterfall, overcollateralization and interest coverage tests, subordination levels available to each class of Rated Notes, and the reinvestment and non-call period provisions;

(c) The legal structure of the transaction, including the Issuer's exempted company status under Cayman Islands law, the Co-Issuer's limited liability company structure under Delaware law, the terms of the Indenture and ancillary transaction documents, and the enforceability of the security interest in the collateral; and

(d) The capabilities, organizational structure, risk management processes, and historical track record of the Collateral Manager, including the performance of prior CLO vehicles managed by Driftwood Credit Management LLC.

In arriving at the final ratings, Brindoval applied its CLO rating methodology, including quantitative cash-flow modeling and scenario analysis calibrated to the target portfolio characteristics, supplemental stress testing, and qualitative assessments of manager and structural risk. The applicable criteria documents are available on Brindoval's website at www.crestviewratings.com.

Brindoval's model review for this transaction was completed on July 28, 2023. Preliminary ratings were communicated to the Issuer and the Lead Placement Agent on August 4, 2023. Following receipt of final transaction documentation and confirmation of pricing terms, this letter confirms the final ratings as of the pricing date of September 8, 2023.

The ratings assigned to the Rated Notes address the ultimate payment of interest (excluding any deferral of interest that may occur on the Class B Notes, Class C Notes, and Class D Notes during any period in which a coverage test failure is in effect, which deferral is contemplated by the terms of the Indenture) and the ultimate repayment of principal on the Rated Notes by the stated maturity date of October 15, 2036.

4. Rating Conditions and Assumptions

4.1 Conditions to Ratings

The final ratings confirmed herein are conditioned upon each of the following:

(a) Receipt of Final Transaction Documents. Brindoval has received, or will receive prior to the Closing Date, final, executed versions of the Indenture dated August 22, 2023 (as supplemented by the First Supplemental Indenture dated September 8, 2023), the Collateral Management Agreement, and the Note Purchase Agreement. Each such document must be in form and substance materially consistent with the drafts reviewed by Brindoval in connection with its rating analysis. In the event that any executed document contains material modifications from the versions reviewed by Brindoval, Brindoval reserves the right to review and, if appropriate, revise the ratings assigned herein.

(b) Legal Opinions. The legal opinions to be delivered at or prior to the Closing Date, including (i) the U.S. legal opinion and tax opinion of Calderwood & Harkness LLP, covering, among other matters, the enforceability of the transaction documents, the characterization of the Notes as debt for U.S. federal income tax purposes, and the non-consolidation of the Issuer and the Co-Issuer with the Collateral Manager or any of its affiliates in a bankruptcy proceeding, and (ii) the Cayman Islands legal opinion of Applegategate Offshore Services Ltd., covering the due incorporation, valid existence, and good standing of the Issuer and the enforceability of the Indenture and related documents under Cayman Islands law, must be consistent in scope and substance with the forms reviewed by Brindoval.

(c) Effective Date Conditions. The Issuer must satisfy all Effective Date conditions, including compliance with all collateral quality tests and coverage tests specified in the Indenture, by the Effective Date deadline of December 12, 2023. Brindoval's ratings are assigned in anticipation of such compliance.

(d) No Material Changes. There shall have been no material changes to the capital structure, collateral eligibility criteria, priority of payments waterfall, or any other material terms of the transaction from those reflected in the Offering Memorandum dated August 18, 2023 and the Indenture dated August 22, 2023. In the event of any material changes, Brindoval reserves the right to reassess the ratings.

4.2 Assumptions. In conducting its analysis and assigning the final ratings, Brindoval has made the following assumptions:

(a) Brindoval has assumed the accuracy and completeness of all information and data provided by the Issuer, the Co-Issuer, and the Collateral Manager, including portfolio stratification data, obligor-level credit information, industry classifications, loan-level terms and characteristics, and information regarding the Collateral Manager's organizational structure, key personnel, investment processes, and historical track record. Brindoval has not independently verified such information and has relied upon the representations of the Issuer and the Collateral Manager regarding the accuracy thereof.

(b) Brindoval has assumed that the transaction will be consummated in all material respects in accordance with the terms and conditions described in the Offering Memorandum dated August 18, 2023, the Indenture dated August 22, 2023 (as supplemented), and the Note Purchase Agreement dated September 8, 2023, and that all conditions precedent to closing will be satisfied.

(c) Brindoval has relied upon the legal opinions to be delivered at or prior to closing for conclusions regarding the enforceability of the transaction documents, the validity of the security interest in the collateral, the characterization of the transaction as a true sale and financing rather than a secured lending, and the non-consolidation of the Issuer and Co-Issuer with the Collateral Manager or any affiliated entity. Brindoval is not a law firm and has not provided, and does not purport to provide, any legal analysis.

5. Ongoing Surveillance

Brindoval will conduct ongoing surveillance of the ratings assigned to the Rated Notes in accordance with its CLO surveillance methodology, as updated from time to time. Surveillance activities are designed to monitor the ongoing creditworthiness of the Rated Notes in light of changes in collateral composition, portfolio credit quality, structural performance, and macroeconomic conditions.

Surveillance reviews will be conducted on a regular basis, coinciding with the receipt and analysis of trustee reports furnished by the Trustee on each quarterly payment date (i.e., the 15th of January, April, July, and October). The Collateral Administrator, Ironclad Trust Company, N.A., will provide periodic compliance reports to Brindoval detailing, among other things, the results of the collateral quality tests, coverage tests, and concentration limitations, as well as updated portfolio stratification data and par gain/loss information.

The Issuer and the Collateral Manager are expected to provide ongoing cooperation and timely access to information as required pursuant to the terms of the Engagement Letter and the Collateral Management Agreement. This includes, without limitation, notification to Brindoval of any material amendments to the transaction documents, material changes in the composition of the collateral portfolio, changes in key personnel of the Collateral Manager, or any other developments that could have a material impact on the creditworthiness of the Rated Notes.

Any material changes to the transaction structure, collateral composition, priority of payments, collateral eligibility criteria, or the organizational structure or investment processes of the Collateral Manager could result in a rating review or rating action by Brindoval, including an upgrade, downgrade, placement on credit watch (positive or negative), suspension, or withdrawal of any or all of the ratings assigned to the Rated Notes.

6. Limitations and Disclaimers

6.1 Nature of Ratings

Brindoval's credit ratings are expressions of opinion regarding the creditworthiness of the Rated Notes and the ability of the Issuer to meet its financial obligations with respect to such Rated Notes. Brindoval's ratings are not, and should not be construed as, recommendations to purchase, sell, or hold any security, nor do they constitute investment advice of any kind. The assignment of a rating by Brindoval does not constitute an endorsement of the Issuer, the Collateral Manager, or any other party to the transaction, nor does it constitute an opinion regarding the suitability of any investment for any particular investor.

Brindoval's ratings do not address the market value, market price, price volatility, or liquidity of the Rated Notes, nor do they address the suitability of the Rated Notes for any particular investor, investment objective, or risk tolerance. The ratings address only the likelihood of timely payment of interest (subject to any permitted deferrals as described in the Indenture) and ultimate repayment of principal on the Rated Notes by the stated maturity date of October 15, 2036.

6.2 No Audit

Brindoval has not independently verified the accuracy or completeness of the information provided to it by the Issuer, the Co-Issuer, the Collateral Manager, or any other party in connection with the assignment of the ratings set forth herein, and Brindoval does not assume any responsibility or liability for the accuracy or completeness of such information. No audit, examination, appraisal, or evaluation of any kind has been conducted by Brindoval with respect to the Issuer, the Co-Issuer, the Collateral Manager, or any of their respective affiliates. Brindoval's analysis is based on information available to it at the time of the analysis, and the ratings may not reflect events or conditions occurring after the date hereof.

6.3 Rating May Be Changed, Suspended, or Withdrawn

Brindoval's ratings are subject to change at any time. Brindoval reserves the right, in its sole discretion, to raise, lower, place on credit watch (positive or negative), suspend, or withdraw any or all of the ratings assigned to the Rated Notes at any time and for any reason, without prior notice to the Issuer, the Co-Issuer, the Collateral Manager, or any holder of the Rated Notes. Any such rating action will be published and disseminated by Brindoval in accordance with its policies and procedures, which are available on Brindoval's website at www.crestviewratings.com. Brindoval is under no obligation to maintain any rating for any specified period of time.

6.4 Limitation on Reliance

This letter is provided solely for the benefit of the addressees hereof and the parties to the Indenture and the Note Purchase Agreement. This letter may not be used, relied upon, quoted, excerpted, reproduced, or distributed by any other person, or for any purpose other than the purposes contemplated by the Engagement Letter, without the prior written consent of Brindoval Analytical Services Inc. This letter does not create any obligation, duty, or liability on the part of Brindoval to any person other than the addressees hereof, and no third party shall be entitled to rely on the ratings or opinions expressed herein.

7. Contact Information

For questions or inquiries regarding this rating confirmation, the underlying analysis, or Brindoval's ongoing surveillance of the Driftwood CLO 2023-I transaction, please contact:

Anita Delgado Senior Director, Structured Finance Ratings Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041 Telephone: (212) 555-4810

Email: adelgado@crestviewratings.com

Brian Whitford Lead Analyst, CLO Group Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041 Telephone: (212) 555-4837

Email: bwhitford@crestviewratings.com

Very truly yours,

BRINDOVAL ANALYTICAL SERVICES INC.

By: ________

Name: Anita Delgado

Title: Senior Director, Structured Finance Ratings

Date: September 8, 2023

No enclosures.

cc:

Driftwood CLO 2023-I, LLC c/o National Registered Agents Inc. 1209 Orange Street, Wilmington, DE 19801

Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100, Miami, FL 33131

Attention: David Hwan, Managing Director, Structured Credit

Ironclad Trust Company, N.A. 100 Wall Street, Suite 1650, New York, NY 10005

Attention: Catherine Nowak, Vice President, Corporate Trust

Meridian Atlantic Securities LLC 383 Madison Avenue, 22nd Floor, New York, NY 10179

Attention: Jonathan Halevy, Managing Director

Northbridge Capital Markets Inc.

Attention: Raymond Cho, SVP, Structured Credit Sales

Calderwood & Harkness LLP 450 Park Avenue, New York, NY 10022

Attention: Samuel Eklund, Partner, and Hannah Brinkley, Associate

Barrington, Locke & Hayes LLP

Attention: Gregory Fontaine, Partner

Ashworth & Pratt LLP

Attention: Lillian Marchetti, Partner

Class of Notes	CUSIP (144A)	Aggregate Principal Amount	Brindoval Rating
Class A-1 Notes	26738TAA5	$256,000,000	AAA
Class A-2 Notes	26738TAB3	$40,000,000	AA
Class B Notes	26738TAC1	$28,000,000	A
Class C Notes	26738TAD9	$24,000,000	BBB
Class D Notes	26738TAE7	$16,000,000	BB
Class of Notes	Aggregate Principal Amount	Percentage of Capital Structure	Spread / Coupon	Brindoval Rating
Class A-1 Notes	$256,000,000	64.00%	SOFR + 155 bps	AAA
Class A-2 Notes	$40,000,000	10.00%	SOFR + 190 bps	AA
Class B Notes	$28,000,000	7.00%	SOFR + 230 bps	A
Class C Notes	$24,000,000	6.00%	SOFR + 310 bps	BBB
Class D Notes	$16,000,000	4.00%	SOFR + 625 bps	BB
Subordinated Notes (Equity)	$36,000,000	9.00%	Residual	Not Rated
Total	$400,000,000	100.00%

BRINDOVAL ANALYTICAL SERVICES INC. 55 Water Street, 40th Floor New York, NY 10041
Delaware Corporation — Nationally Recognized Statistical Rating Organization Registered with the U.S. Securities and Exchange Commission
September 8, 2023
Driftwood CLO 2023-I, Ltd. PO Box 4927, Windward House, 3rd Floor George Town, Grand Cayman KY1-1306 Cayman Islands
With copies to:
Driftwood CLO 2023-I, LLC c/o National Registered Agents Inc. 1209 Orange Street Wilmington, DE 19801
Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100 Miami, FL 33131
Ironclad Trust Company, N.A. (as Trustee) 100 Wall Street, Suite 1650 New York, NY 10005
Attention: Catherine Nowak, Vice President, Corporate Trust
Meridian Atlantic Securities LLC (as Lead Placement Agent) 383 Madison Avenue, 22nd Floor New York, NY 10179
Attention: Jonathan Halevy, Managing Director, CLO Structuring & Origination
Calderwood & Harkness LLP (as Issuer's Counsel) 450 Park Avenue New York, NY 10022
Attention: Samuel Eklund
Re: Driftwood CLO 2023-I — Confirmation of Final Ratings on Secured Notes
Ladies and Gentlemen:
Reference is hereby made to the engagement letter dated June 14, 2023 (the "Engagement Letter"), between Brindoval Analytical Services Inc. ("Brindoval," "we," or "us") and Driftwood CLO 2023-I, Ltd. (the "Issuer"), pursuant to which Brindoval was engaged to assign and conduct ongoing surveillance of credit ratings in connection with the transaction described herein. Capitalized terms used but not otherwise defined in this letter shall have the meanings ascribed to them in the Indenture (as defined below) or the Offering Memorandum (as defined below), as applicable.
This letter confirms the final ratings assigned by Brindoval to certain classes of secured notes (the "Rated Notes") issued in connection with the issuance by Driftwood CLO 2023-I, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the "Issuer"), and Driftwood CLO 2023-I, LLC, a Delaware limited liability company (the "Co-Issuer" and, together with the Issuer, the "Co-Issuers"), of $400,000,000 in aggregate principal amount of secured notes and subordinated notes (collectively, the "Notes"). The Notes were issued 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"). Reference is also made to the Offering Memorandum dated August 18, 2023 (the "Offering Memorandum") and the Note Purchase Agreement dated September 8, 2023 (the "Note Purchase Agreement"), each relating to the offering and sale of the Notes.
Brindoval has completed its analysis of the transaction and hereby confirms the final ratings assigned to the Rated Notes in connection with the pricing of the Notes on the date hereof (September 8, 2023). The basis for such ratings, the key structural features reviewed, and applicable conditions, assumptions, and limitations are set forth below.
1. Final Ratings
1.1 Ratings Assigned
Brindoval Analytical Services Inc. has assigned the following final ratings to the classes of secured notes described below, each issued by the Co-Issuers pursuant to the Indenture:
The Class A-1 Notes offered pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), bear CUSIP G2694LAA7. The Class A-1 Notes offered pursuant to Rule 144A under the Securities Act bear CUSIP 26738TAA5 and ISIN US26738TAA51. The Regulation S notes of the Class A-1 Notes carry the same Brindoval rating as the corresponding Rule 144A tranche set forth above. The foregoing CUSIPs and ISINs apply to the respective tranches as indicated in the Offering Memorandum, and the ratings apply irrespective of the form of offering.
The total aggregate principal amount of Rated Notes is $364,000,000.
The Subordinated Notes (CUSIP 26738TAF4), having an aggregate principal amount of $36,000,000, are not rated by Brindoval Analytical Services Inc. and are expressly excluded from this rating confirmation. Brindoval expresses no opinion regarding the creditworthiness, expected returns, or risk characteristics of the Subordinated Notes.
1.2 Confirmation of Dual Rating
Brindoval acknowledges that the above-listed classes of Rated Notes are also rated by Ridgeline Credit Ratings LLC, another nationally recognized statistical rating organization. Brindoval's ratings have been assigned independently, based solely on Brindoval's proprietary methodologies, analytical frameworks, and criteria. Brindoval has not consulted with, referenced, or otherwise relied upon the ratings or analysis of Ridgeline Credit Ratings LLC, and no inference should be drawn from any similarity or difference between the respective ratings assigned by each agency. The ratings of Brindoval and the ratings of Ridgeline Credit Ratings LLC are determined using distinct methodologies and may not be directly comparable.
2. Transaction Summary and Key Structural Features Reviewed
2.1 Transaction Structure
The transaction is structured as a broadly syndicated cash-flow collateralized loan obligation ("CLO") backed by a managed portfolio composed primarily of broadly syndicated first-lien senior secured leveraged loans. The obligors underlying such loans are predominantly domiciled in the United States, although the collateral eligibility criteria permit limited exposure to non-U.S. obligors as more fully described in the Offering Memorandum and the Indenture. The target portfolio par amount is $400,000,000.
The portfolio is managed by Driftwood Credit Management LLC (the "Collateral Manager"), a Delaware limited liability company registered as an investment adviser with the U.S. Securities and Exchange Commission (CRD #182447). The Collateral Manager acts pursuant to a Collateral Management Agreement dated as of August 22, 2023 (the "Collateral Management Agreement"), among the Issuer, the Co-Issuer, and the Collateral Manager. In conducting its analysis, Brindoval reviewed the investment management capabilities, organizational structure, risk management processes, and historical performance of the Collateral Manager's CLO platform, including the track records and qualifications of the following key investment professionals:
•  Marcus Sorensen, Founder & Chief Investment Officer, who has over 22 years of experience in leveraged finance and structured credit and is responsible for overall investment strategy and portfolio oversight; and
•  David Hwan, Managing Director, Structured Credit, who serves as the designated portfolio manager for the Collateral Manager's CLO platform and has primary day-to-day responsibility for collateral selection, trading, and compliance monitoring for the Driftwood CLO program.
Brindoval's evaluation of the Collateral Manager is an integral component of its CLO rating methodology. The assessment included a review of the Collateral Manager's historical default rates, loss-given-default experience, portfolio turnover, and adherence to stated investment guidelines across prior CLO vehicles managed by the Collateral Manager.
2.2 Capital Structure
The capital structure of the transaction, as reflected in the Indenture and the Offering Memorandum, is summarized as follows:
All floating-rate notes are indexed to Compounded SOFR, as described in Section 2.4 below. The Subordinated Notes represent the residual equity interest in the transaction and are entitled to distributions only after all obligations to the Rated Notes have been satisfied in accordance with the priority of payments waterfall set forth in the Indenture.
2.3 Key Subordination Levels
The subordination levels available to each class of Rated Notes, calculated as the aggregate principal amount of all classes of Notes junior to the applicable class (including the Subordinated Notes) expressed as a percentage of total capital structure par, are 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%
These subordination levels represent a key element of the credit enhancement supporting each class of Rated Notes and were a significant factor in Brindoval's determination of the final ratings. The subordination levels are designed to provide each class of Rated Notes with protection against credit losses in the underlying collateral portfolio commensurate with the assigned rating.
2.4 Key Structural Protections
Brindoval reviewed the following key structural protections and features of the transaction, each as set forth in the Indenture:
Reference Rate. The reference rate for all floating-rate notes is Compounded SOFR, calculated in accordance with the ARRC-recommended "26253" lookback-without-observation-shift fallback convention. The day count convention applicable to all interest calculations is Actual/360. The Indenture contains customary fallback provisions for the determination of a successor reference rate in the event that Compounded SOFR is no longer available or representative.
Overcollateralization Tests. The Indenture provides for the following overcollateralization ("O/C") tests, which are measured on each determination date based on the par value of the collateral portfolio relative to the outstanding principal balance of the applicable classes of Rated Notes:
•  Class A O/C Test: 128.00%
•  Class B O/C Test: 118.00%
•  Class C O/C Test: 110.00%
•  Class D O/C Test: 105.50%
Failure to satisfy any O/C test on a payment date will result in the redirection of interest and principal proceeds in accordance with the priority of payments waterfall, with excess proceeds applied to the redemption of the most senior outstanding class of Rated Notes until such test is restored to compliance.
Interest Coverage Tests. The Indenture provides for the following interest coverage ("I/C") tests, which measure the ratio of interest proceeds from the collateral portfolio to the interest obligations on the applicable classes of Rated Notes:
•  Class A I/C Test: 120.00%
•  Class B I/C Test: 115.00%
•  Class C I/C Test: 110.00%
•  Class D I/C Test: 105.00%
Similar to the O/C tests, failure to satisfy any I/C test on a payment date will result in the redirection of proceeds in accordance with the priority of payments waterfall as specified in the Indenture.
Non-Call Period. The 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 Issuer may not optionally redeem any class of Rated Notes (other than in connection with a tax redemption or clean-up call as permitted under the Indenture).
Reinvestment Period. The Collateral Manager is authorized to reinvest principal proceeds received from the collateral portfolio during the reinvestment period, which extends for five (5) years from the Closing Date, ending on September 12, 2028. Following the expiration of the reinvestment period, principal proceeds will generally be applied to the sequential redemption of the Rated Notes in accordance with their priority.
Stated Maturity. The stated maturity date for all classes of Notes is October 15, 2036, which represents the date by which all principal and accrued interest on the Rated Notes must be paid in full.
Payment Dates. Payments of interest and principal on the Notes are made quarterly on the 15th day of January, April, July, and October of each year, subject to the business day convention. The first payment date is January 15, 2024.
2.5 Collateral Eligibility Criteria Reviewed
Brindoval reviewed the collateral eligibility criteria and portfolio quality tests set forth in the Indenture, which govern the composition and quality of the collateral portfolio throughout the life of the transaction. The key parameters reviewed include the following:
•  Minimum Weighted Average Spread: 350 basis points
•  Maximum Weighted Average Life: 7.5 years
•  Minimum Diversity Score: 60
•  Maximum CCC Bucket: 7.5% of aggregate collateral par amount ($30,000,000 based on the target par amount)
•  Maximum Second-Lien Bucket: 5.0% of aggregate collateral par amount ($20,000,000 based on the target par amount)
•  Maximum Fixed-Rate Bucket: 10.0% of aggregate collateral par amount ($40,000,000 based on the target par amount)
•  Minimum Weighted Average Recovery Rate: 45.0%
•  Minimum Weighted Average Rating Factor (WARF): 2,850 (calculated using the Brindoval rating factor scale)
These collateral eligibility criteria and portfolio quality tests are designed to maintain a minimum level of credit quality, diversification, and structural integrity in the collateral portfolio over the life of the transaction. Compliance with these tests is monitored on each determination date by the Collateral Administrator and reported to the Trustee.
2.6 Effective Date
The Effective Date for the transaction is required to occur no later than December 12, 2023, which is ninety (90) days following the pricing date. On the Effective Date, the Issuer must demonstrate compliance with all collateral quality tests, coverage tests, and concentration limitations set forth in the Indenture, based on the composition of the collateral portfolio as of such date.
The final ratings confirmed herein are subject to the Issuer satisfying the Effective Date conditions by the Effective Date deadline. In the event that the Effective Date conditions are not satisfied by December 12, 2023, Brindoval reserves the right to review, and potentially withdraw, lower, or place on credit watch, the ratings assigned to the Rated Notes.
3. Basis of Ratings
The final ratings set forth in Section 1 above are based on Brindoval's comprehensive analysis of the following factors:
(a) The credit quality of the collateral pool, including the credit risk profile of the individual obligors, industry and geographic diversification, weighted average rating factor, recovery rate assumptions, and default probability distributions applicable to the portfolio;
(b) The structural features of the transaction, including the priority of payments waterfall, overcollateralization and interest coverage tests, subordination levels available to each class of Rated Notes, and the reinvestment and non-call period provisions;
(c) The legal structure of the transaction, including the Issuer's exempted company status under Cayman Islands law, the Co-Issuer's limited liability company structure under Delaware law, the terms of the Indenture and ancillary transaction documents, and the enforceability of the security interest in the collateral; and
(d) The capabilities, organizational structure, risk management processes, and historical track record of the Collateral Manager, including the performance of prior CLO vehicles managed by Driftwood Credit Management LLC.
In arriving at the final ratings, Brindoval applied its CLO rating methodology, including quantitative cash-flow modeling and scenario analysis calibrated to the target portfolio characteristics, supplemental stress testing, and qualitative assessments of manager and structural risk. The applicable criteria documents are available on Brindoval's website at www.crestviewratings.com.
Brindoval's model review for this transaction was completed on July 28, 2023. Preliminary ratings were communicated to the Issuer and the Lead Placement Agent on August 4, 2023. Following receipt of final transaction documentation and confirmation of pricing terms, this letter confirms the final ratings as of the pricing date of September 8, 2023.
The ratings assigned to the Rated Notes address the ultimate payment of interest (excluding any deferral of interest that may occur on the Class B Notes, Class C Notes, and Class D Notes during any period in which a coverage test failure is in effect, which deferral is contemplated by the terms of the Indenture) and the ultimate repayment of principal on the Rated Notes by the stated maturity date of October 15, 2036.
4. Rating Conditions and Assumptions
4.1 Conditions to Ratings
The final ratings confirmed herein are conditioned upon each of the following:
(a) Receipt of Final Transaction Documents. Brindoval has received, or will receive prior to the Closing Date, final, executed versions of the Indenture dated August 22, 2023 (as supplemented by the First Supplemental Indenture dated September 8, 2023), the Collateral Management Agreement, and the Note Purchase Agreement. Each such document must be in form and substance materially consistent with the drafts reviewed by Brindoval in connection with its rating analysis. In the event that any executed document contains material modifications from the versions reviewed by Brindoval, Brindoval reserves the right to review and, if appropriate, revise the ratings assigned herein.
(b) Legal Opinions. The legal opinions to be delivered at or prior to the Closing Date, including (i) the U.S. legal opinion and tax opinion of Calderwood & Harkness LLP, covering, among other matters, the enforceability of the transaction documents, the characterization of the Notes as debt for U.S. federal income tax purposes, and the non-consolidation of the Issuer and the Co-Issuer with the Collateral Manager or any of its affiliates in a bankruptcy proceeding, and (ii) the Cayman Islands legal opinion of Applegategate Offshore Services Ltd., covering the due incorporation, valid existence, and good standing of the Issuer and the enforceability of the Indenture and related documents under Cayman Islands law, must be consistent in scope and substance with the forms reviewed by Brindoval.
(c) Effective Date Conditions. The Issuer must satisfy all Effective Date conditions, including compliance with all collateral quality tests and coverage tests specified in the Indenture, by the Effective Date deadline of December 12, 2023. Brindoval's ratings are assigned in anticipation of such compliance.
(d) No Material Changes. There shall have been no material changes to the capital structure, collateral eligibility criteria, priority of payments waterfall, or any other material terms of the transaction from those reflected in the Offering Memorandum dated August 18, 2023 and the Indenture dated August 22, 2023. In the event of any material changes, Brindoval reserves the right to reassess the ratings.
4.2 Assumptions.  In conducting its analysis and assigning the final ratings, Brindoval has made the following assumptions:
(a) Brindoval has assumed the accuracy and completeness of all information and data provided by the Issuer, the Co-Issuer, and the Collateral Manager, including portfolio stratification data, obligor-level credit information, industry classifications, loan-level terms and characteristics, and information regarding the Collateral Manager's organizational structure, key personnel, investment processes, and historical track record. Brindoval has not independently verified such information and has relied upon the representations of the Issuer and the Collateral Manager regarding the accuracy thereof.
(b) Brindoval has assumed that the transaction will be consummated in all material respects in accordance with the terms and conditions described in the Offering Memorandum dated August 18, 2023, the Indenture dated August 22, 2023 (as supplemented), and the Note Purchase Agreement dated September 8, 2023, and that all conditions precedent to closing will be satisfied.
(c) Brindoval has relied upon the legal opinions to be delivered at or prior to closing for conclusions regarding the enforceability of the transaction documents, the validity of the security interest in the collateral, the characterization of the transaction as a true sale and financing rather than a secured lending, and the non-consolidation of the Issuer and Co-Issuer with the Collateral Manager or any affiliated entity. Brindoval is not a law firm and has not provided, and does not purport to provide, any legal analysis.
5. Ongoing Surveillance
Brindoval will conduct ongoing surveillance of the ratings assigned to the Rated Notes in accordance with its CLO surveillance methodology, as updated from time to time. Surveillance activities are designed to monitor the ongoing creditworthiness of the Rated Notes in light of changes in collateral composition, portfolio credit quality, structural performance, and macroeconomic conditions.
Surveillance reviews will be conducted on a regular basis, coinciding with the receipt and analysis of trustee reports furnished by the Trustee on each quarterly payment date (i.e., the 15th of January, April, July, and October). The Collateral Administrator, Ironclad Trust Company, N.A., will provide periodic compliance reports to Brindoval detailing, among other things, the results of the collateral quality tests, coverage tests, and concentration limitations, as well as updated portfolio stratification data and par gain/loss information.
The Issuer and the Collateral Manager are expected to provide ongoing cooperation and timely access to information as required pursuant to the terms of the Engagement Letter and the Collateral Management Agreement. This includes, without limitation, notification to Brindoval of any material amendments to the transaction documents, material changes in the composition of the collateral portfolio, changes in key personnel of the Collateral Manager, or any other developments that could have a material impact on the creditworthiness of the Rated Notes.
Any material changes to the transaction structure, collateral composition, priority of payments, collateral eligibility criteria, or the organizational structure or investment processes of the Collateral Manager could result in a rating review or rating action by Brindoval, including an upgrade, downgrade, placement on credit watch (positive or negative), suspension, or withdrawal of any or all of the ratings assigned to the Rated Notes.
6. Limitations and Disclaimers
6.1 Nature of Ratings
Brindoval's credit ratings are expressions of opinion regarding the creditworthiness of the Rated Notes and the ability of the Issuer to meet its financial obligations with respect to such Rated Notes. Brindoval's ratings are not, and should not be construed as, recommendations to purchase, sell, or hold any security, nor do they constitute investment advice of any kind. The assignment of a rating by Brindoval does not constitute an endorsement of the Issuer, the Collateral Manager, or any other party to the transaction, nor does it constitute an opinion regarding the suitability of any investment for any particular investor.
Brindoval's ratings do not address the market value, market price, price volatility, or liquidity of the Rated Notes, nor do they address the suitability of the Rated Notes for any particular investor, investment objective, or risk tolerance. The ratings address only the likelihood of timely payment of interest (subject to any permitted deferrals as described in the Indenture) and ultimate repayment of principal on the Rated Notes by the stated maturity date of October 15, 2036.
6.2 No Audit
Brindoval has not independently verified the accuracy or completeness of the information provided to it by the Issuer, the Co-Issuer, the Collateral Manager, or any other party in connection with the assignment of the ratings set forth herein, and Brindoval does not assume any responsibility or liability for the accuracy or completeness of such information. No audit, examination, appraisal, or evaluation of any kind has been conducted by Brindoval with respect to the Issuer, the Co-Issuer, the Collateral Manager, or any of their respective affiliates. Brindoval's analysis is based on information available to it at the time of the analysis, and the ratings may not reflect events or conditions occurring after the date hereof.
6.3 Rating May Be Changed, Suspended, or Withdrawn
Brindoval's ratings are subject to change at any time. Brindoval reserves the right, in its sole discretion, to raise, lower, place on credit watch (positive or negative), suspend, or withdraw any or all of the ratings assigned to the Rated Notes at any time and for any reason, without prior notice to the Issuer, the Co-Issuer, the Collateral Manager, or any holder of the Rated Notes. Any such rating action will be published and disseminated by Brindoval in accordance with its policies and procedures, which are available on Brindoval's website at www.crestviewratings.com. Brindoval is under no obligation to maintain any rating for any specified period of time.
6.4 Limitation on Reliance
This letter is provided solely for the benefit of the addressees hereof and the parties to the Indenture and the Note Purchase Agreement. This letter may not be used, relied upon, quoted, excerpted, reproduced, or distributed by any other person, or for any purpose other than the purposes contemplated by the Engagement Letter, without the prior written consent of Brindoval Analytical Services Inc. This letter does not create any obligation, duty, or liability on the part of Brindoval to any person other than the addressees hereof, and no third party shall be entitled to rely on the ratings or opinions expressed herein.
7. Contact Information
For questions or inquiries regarding this rating confirmation, the underlying analysis, or Brindoval's ongoing surveillance of the Driftwood CLO 2023-I transaction, please contact:
Anita Delgado Senior Director, Structured Finance Ratings Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041 Telephone: (212) 555-4810
Email: adelgado@crestviewratings.com
Brian Whitford Lead Analyst, CLO Group Brindoval Analytical Services Inc. 55 Water Street, 40th Floor New York, NY 10041 Telephone: (212) 555-4837
Email: bwhitford@crestviewratings.com
Very truly yours,
BRINDOVAL ANALYTICAL SERVICES INC.
By: ________
Name: Anita Delgado
Title: Senior Director, Structured Finance Ratings
Date: September 8, 2023
No enclosures.
cc:
Driftwood CLO 2023-I, LLC c/o National Registered Agents Inc. 1209 Orange Street, Wilmington, DE 19801
Driftwood Credit Management LLC 200 Brickell Avenue, Suite 3100, Miami, FL 33131
Attention: David Hwan, Managing Director, Structured Credit
Ironclad Trust Company, N.A. 100 Wall Street, Suite 1650, New York, NY 10005
Attention: Catherine Nowak, Vice President, Corporate Trust
Meridian Atlantic Securities LLC 383 Madison Avenue, 22nd Floor, New York, NY 10179
Attention: Jonathan Halevy, Managing Director
Northbridge Capital Markets Inc.
Attention: Raymond Cho, SVP, Structured Credit Sales
Calderwood & Harkness LLP 450 Park Avenue, New York, NY 10022
Attention: Samuel Eklund, Partner, and Hannah Brinkley, Associate
Barrington, Locke & Hayes LLP
Attention: Gregory Fontaine, Partner
Ashworth & Pratt LLP
Attention: Lillian Marchetti, Partner
Class of Notes | CUSIP (144A) | Aggregate Principal Amount | Brindoval Rating
Class A-1 Notes | 26738TAA5 | $256,000,000 | AAA
Class A-2 Notes | 26738TAB3 | $40,000,000 | AA
Class B Notes | 26738TAC1 | $28,000,000 | A
Class C Notes | 26738TAD9 | $24,000,000 | BBB
Class D Notes | 26738TAE7 | $16,000,000 | BB
Class of Notes | Aggregate Principal Amount | Percentage of Capital Structure | Spread / Coupon | Brindoval Rating
Class A-1 Notes | $256,000,000 | 64.00% | SOFR + 155 bps | AAA
Class A-2 Notes | $40,000,000 | 10.00% | SOFR + 190 bps | AA
Class B Notes | $28,000,000 | 7.00% | SOFR + 230 bps | A
Class C Notes | $24,000,000 | 6.00% | SOFR + 310 bps | BBB
Class D Notes | $16,000,000 | 4.00% | SOFR + 625 bps | BB
Subordinated Notes (Equity) | $36,000,000 | 9.00% | Residual | Not Rated
Total | $400,000,000 | 100.00%

BRINDOVAL ANALYTICAL SERVICES INC. 55 Water Street, 40th Floor New York, NY 10041

BRINDOVAL ANALYTICAL SERVICES INC.

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