NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken rating actions on the short-term ratings assigned to variable-rate demand preferred shares (VRDPs) issued by 23 municipal closed-end funds (CEFs) managed by BlackRock Advisors, LLC (BlackRock) and 12 municipal CEFs managed by Nuveen Fund Advisors, Inc. (Nuveen) following corresponding rating actions by Fitch on the associated liquidity providers. A complete list of the rating actions is included at the end of this rating action commentary.
SUMMARY OF RATING ACTIONS:
The rating actions include the downgrade of the short-term ratings of 26 series of VRDPs to 'F1' from 'F1+' and the affirmation of nine series of VRDPs. In addition, all 35 series of VRDPs have been removed from Rating Watch Negative. Associated liquidity providers include Bank of America, N.A. (Bank of America, rated 'A/F1'), Citibank, N.A. (Citibank, rated 'A/F1'), Barclays Bank PLC (Barclays, rated 'A/F1'), and Morgan Stanley Bank, N.A. (Morgan Stanley, rated 'A/F1').
The 'AAA' long-term ratings assigned to each of the VRDPs are unaffected by these actions, as the long-term ratings are a function of the asset coverage and structural protections to the VRDPs, whereas the short-term ratings reflect the ability of the associated liquidity provider to repurchase the VRDPs when tendered by the holder, among other pre-specified events.
KEY RATING DRIVERS
--The downgrades of the short-term ratings reflect the corresponding downgrades of the associated liquidity providers that provide unconditional liquidity support to the VRDPs in the event of a tender by the holder, among other pre-specified events.
--The affirmations of the short-term ratings reflect the corresponding affirmations of the associated liquidity providers that provide unconditional liquidity support to the VRDPs in the event of a tender by the holder, among other pre-specified events.
--The removal of the short-term ratings from Rating Watch Negative reflects the corresponding removal from Rating Watch Negative of the ratings assigned to the associated liquidity providers that provide unconditional liquidity support to the VRDPs in the event of a tender by the holder, among other pre-specified events.
RATINGS SENSITIVITY
The ratings assigned to the VRDP shares may be sensitive to material changes in the leverage composition, portfolio credit quality, or market risk of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.
Certain terms of the funds' asset coverage tests are set in the purchase and fee agreements, which are renewed on a periodic basis. Changes to these terms that weaken the tests may have negative rating implications.
The short-term ratings assigned to the VRDP shares remain sensitive to any further changes in the financial condition of the associated liquidity providers. A downgrade of the liquidity provider to 'F2' would result in a downgrade of the short-term ratings of the VRDP shares to 'F2', absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating, given the acceleration features in the transaction that would result in a mandatory tender of the VRDPs for remarketing, and if not successful, purchase by the liquidity provider.
RATING ACTIONS:
VRDPS WITH BANK OF AMERICA AS THE LIQUIDITY PROVIDER:
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (MUJ)
--VRDPs, series W-7, due July 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniHoldings New York Quality Fund, Inc. (MHN)
--VRDPs, series W-7, due July 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield New Jersey Quality Fund, Inc. (MJI)
--VRDPs, series W-7, due July 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniHoldings Investment Quality Fund (MFL)
--VRDPs, series W-7, due July 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Fund, Inc. (MYD)
--VRDPs, series W-7, due July 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
VRDPS WITH CITIBANK AS THE LIQUIDITY PROVIDER:
BlackRock MuniYield Arizona Fund, Inc. (MZA)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield California Fund, Inc. (MYC)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Michigan Quality Fund II, Inc. (MYM)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Pennsylvania Quality Fund (MPA)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield California Quality Fund, Inc. (MCA)
--VRDPs, series W-7, due May 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Michigan Quality Fund, Inc. (MIY)
--VRDPs, series W-7, due May 2041; downgraded to F1 from F1+ and removed from Rating Watch Negative;
BlackRock MuniYield New Jersey Fund, Inc. (MYJ)
--VRDPs, series W-7, due May 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield New York Quality Fund, Inc. (MYN)
--VRDPs, series W-7, due May 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniEnhanced Fund, Inc. (MEN)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Investment Fund (MYF)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
BlackRock MuniYield Quality Fund III, Inc. (MYI)
--VRDPs, series W-7, due June 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen California Investment Quality Municipal Fund, Inc. (NQC)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen California Performance Plus Municipal Fund, Inc. (NCP)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Insured California Premium Income Municipal Fund 2, Inc. (NCL)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Insured Municipal Opportunity Fund, Inc. (NIO)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen New York Quality Income Municipal Fund, Inc.(NUN)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Premier Insured Municipal Income Fund, Inc. (NIF)
--VRDPs, series 1, due Dec. 1, 2040; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
VRDPS WITH BARCLAYS AS THE LIQUIDITY PROVIDER:
Nuveen Investment Quality Municipal Fund, Inc. (NQM)
--VRDPs, series 1, due May 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Premier Municipal Income Fund, Inc. (NPF)
--VRDPs, series 1, due May 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Premium Income Municipal Fund 2, Inc. (NPM)
--VRDPs, series 1, due May 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
Nuveen Select Quality Municipal Fund, Inc. (NQS)
--VRDPs, series 1, due May 1, 2041; downgraded to 'F1' from 'F1+' and removed from Rating Watch Negative;
VRDPS WITH MORGAN STANLEY BANK AS THE LIQUIDITY PROVIDER:
BlackRock Muni New York Intermediate Duration Fund, Inc. (MNE)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock New York Municipal Bond Trust (BQH)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock New York Municipal Income Quality Trust (BSE)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock New York Municipal Income Trust II (BFY)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock Municipal Bond Investment Trust (BIE)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock Municipal Income Investment Trust (BBF)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative;
BlackRock MuniYield Quality Fund, Inc. (MQY)
--VRDPs, series W-7, due Oct. 2041; affirmed at 'F1' and removed from Rating Watch Negative.
Nuveen California Dividend Advantage Municipal Fund (NAC)
--VRDPs, series 1, due June 1, 2041; affirmed at 'F1' and removed from Rating Watch Negative.
Nuveen Insured California Dividend Advantage Municipal Fund (NKL)
--VRDPs, series 1, due June 1, 2041; affirmed at 'F1' and removed from Rating Watch Negative.
For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
The sources of information used to assess this rating were the public domain, BlackRock and Nuveen.
Applicable Criteria and Related Research:
--'Fitch Downgrades Ratings of Bank of America Corporation' (Dec. 15, 2011);
--'Fitch Downgrades Citigroup's Support Driven Ratings' (Dec. 15, 2011);
--'Fitch Downgrades Barclays to 'A'; Outlook Stable' (Dec. 15, 2011)
--' Fitch Affirms Morgan Stanley's LT IDR at 'A'; Lowers Viability Rating; Pfds on Negative Watch' (Dec. 15, 2011);
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);
--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 30, 2010);
--'Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840
Global Rating Criteria for Asset-Backed Commercial Paper
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=655450
Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654295
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