Fitch Rates ClearBridge Energy MLP Fund's Senior Notes 'AAA'

NEW YORK--()--Fitch Ratings assigns an 'AAA' rating to the following senior secured notes issued by ClearBridge Energy MLP Fund Inc. (NYSE: CEM), a non-diversified, closed-end fund advised by Legg Mason Partners Fund Advisor, LLC (LMPFA) and subadvised by ClearBridge Advisors, LLC (ClearBridge):

--$25,000,000 2.80% Series A Senior Secured Notes due July 12, 2015;

--$50,000,000 3.53% Series B Senior Secured Notes due July 12, 2019;

--$102,000,000 4.06% Series C Senior Secured Notes due July 12, 2022;

--$90,000,000 4.21% Series D Senior Secured Notes due July 12, 2024.

KEY RATING DRIVERS

The rating assignments reflect:

-- Sufficient asset coverage relative to Fitch's published criteria;

-- The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;

-- The legal and regulatory parameters that govern the fund's operations;

-- The capabilities of LMPFA and ClearBridge as investment advisor and subadvisor. As of June 30, 2012, the fund's total assets were approximately $1.9 million.

DETAILS OF THE TRANSACTION

The closing date for the senior notes was July 12, 2012. The fund intends to use the net proceeds from this offering to repay outstanding borrowings on a floating rate line of credit, make new portfolio investments, and for general corporate purposes.

LEVERAGE

After the deal closing, the fund's total leverage was approximately $477 million, not including accrued interest, or approximately 22% of the total assets. The leverage comprised $267 million of senior secured notes and $210 million of outstanding bank borrowing.

ASSET COVERAGE

At the time of the issuance, the fund's asset coverage ratio for the newly issued senior secured notes, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), exceeded 300%, which is the minimum asset coverage required by the 1940 Act for such securities. Also, at the time of issuance, the fund's asset coverage ratios with respect to the same securities, as calculated in accordance with Fitch's 'AAA' overcollateralization (OC) test, exceeded of 100%, which is the minimum asset coverage levels deemed consistent with the rating assigned to the newly issued notes.

Should the asset coverage tests for the senior secured notes decline below their minimum threshold amounts and are not cured in a pre-specified timeframe, the governing documents require the funds to reduce the leverage in a sufficient amount to restore compliance with the applicable asset coverage tests.

THE FUND

The fund commenced its operations on June 25, 2012. The fund's objective is to provide a high level of total return with an emphasis on cash distributions. The fund seeks to achieve its objective by investing primarily in master limited partnerships (MLPs) in the energy sector, which are entities that derive at least 50% of their revenues from the business of exploring, developing, producing, gathering, transporting, processing, storing, refining, distributing, mining or marketing natural gas, natural gas liquids, crude oil, refined petroleum products or coal.

As of Nov. 30, 2011, the fund incurred a deferred tax liability in the amount of $152.1 million. Under a stressed market scenario, the fund may have to liquidate portfolio assets to restore its asset coverage ratios. If such a scenario occurred, any currently existing unrealized gain would likely be eliminated or significantly reduced as a result of asset price declines causing such liquidation. Nonetheless, Fitch rating criteria expect the fund to account 10% of the deferred tax liability as current liability for the purpose of calculating OC coverage for the senior secured notes.

THE ADVISOR AND SUBADVISOR

LMPFA and ClearBridge are wholly owned subsidiaries of Legg Mason, Inc., a global asset management firm with $627 billion in assets under management as of May 31, 2012. ClearBridge is Legg Mason, Inc.'s largest equity manager with approximately $56.6 billion in assets under management, including $3 billion in energy MLPs, as of March 31, 2012. It provides clients with a diverse line of equity-focused strategies in various investment options.

RATINGS SENSITIVITY

The ratings may be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.

For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

The sources of information used to assess these ratings were the public domain, LMPFA, and ClearBridge.

Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);

--'2012 Outlook: Closed-End Fund Leverage' (Dec. 19, 2011).

Applicable Criteria and Related Research:

2012 Outlook: Closed-End Fund Leverage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=660709

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contacts

Fitch Ratings
Brian Bertsch, +1-212-908-0549
Media Relations, New York
brian.bertsch@fitchratings.com
or
Primary Analyst:
Viktoria Baklanova, PhD, CFA, +1-212-908-9162
Senior Director
Fitch Inc.
1 State Street Plaza
New York, New York, 10004
or
Secondary Analyst:
Gwen Fink-Stone, J.D., +1-212-908-9128
or
Committee Chairperson:
Manuel Arrive, CFA, +33-1-44-29-91-77
Senior Director

Sharing

Contacts

Fitch Ratings
Brian Bertsch, +1-212-908-0549
Media Relations, New York
brian.bertsch@fitchratings.com
or
Primary Analyst:
Viktoria Baklanova, PhD, CFA, +1-212-908-9162
Senior Director
Fitch Inc.
1 State Street Plaza
New York, New York, 10004
or
Secondary Analyst:
Gwen Fink-Stone, J.D., +1-212-908-9128
or
Committee Chairperson:
Manuel Arrive, CFA, +33-1-44-29-91-77
Senior Director