KBRA assigns preliminary ratings to four classes of debt issued by Monroe Capital ABS Funding II, LP ("MCAF 2024-1"), a securitization backed by a portfolio of recurring revenue and middle market corporate loans. This transaction is a reset of the Monroe Capital ABS Funding II, LP, which originally closed in February 2023.

MCAF 2024-1 is a $528.4 million securitization managed by Monroe Capital Management Advisors, LLC (“Monroe” or the “Collateral Manager”), an affiliate of Monroe Capital LLC. The securitization consists of $125.0 million of Class A-L-R floating-rate debt, $178.8 million of Class A-1-R fixed-rate debt, $44.9 million of Class B-R fixed-rate notes, $43.6 million of Class C-R fixed-rate notes (collectively the “rated Notes”), and $136.1 million of subordinated notes, which expect to receive payments from a portfolio of recurring revenue loans (“RRLs”) and middle market loans (“MMLs”). This transaction will reset the terms of the original transaction, including the stated maturity, non-call period, reinvestment period, note interest rates and notional balances. Proceeds from the issuance of the new notes will be used to redeem the outstanding notes in full and to purchase new assets ($150 million upsize).

The collateral in MCAF 2024-1 may contain up to 75% RRLs. Monroe’s recurring revenue lending strategy focuses on first-lien senior secured loans to business-to-business software and technology companies with a minimum level of recurring revenue and low loan-to-value ratios. Despite the low level of earnings, the obligors in the portfolio usually have strong liquidity profiles and loan covenants. The portfolio presented to KBRA contains exposures to 72 obligors and has an overall K-WARF of 3303, which equates to a weighted average portfolio assessment around B-.

Monroe is an affiliate of Monroe Capital LLC established in 2004, with $15.9 billion of committed and managed capital under management as of June 2023. Monroe currently manages $9.7 billion in middle market CLOs across approximately 13 outstanding transactions. Since its founding, Monroe has invested $8.6 billion within its Software, Technology, & Recurring Revenue (“S.T.A.R.R.”) strategy. The senior management team averages over 24 years of collective industry experience.

Kroll Bond Rating Agency’s (KBRA) ratings on the Class A-L-R, A-1-R (together the “Class A-R Debt"), and Class B-R Note considers timely payment of interest and ultimate payment of principal by the applicable stated maturity date. Kroll Bond Rating Agency’s (KBRA) ratings on the Class C-R Note considers ultimate payment of interest and principal by the applicable stated maturity date.

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Methodologies

• Structured Finance: Global Structured Finance Counterparty Methodology
• Structured Credit: Structured Credit Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004868

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