NEW YORK--()--Fitch Ratings assigns an 'AAA' rating to the following $287.1 million of new variable municipal term preferred shares (VMTP Shares) issued by BlackRock Muni Intermediate Duration Fund, Inc. (NYSE: MUI). Proceeds will be used to fully redeem the fund's variable rate demand preferred shares (VRDP Shares) on Friday Dec. 21st, 2012.
BlackRock Muni Intermediate Duration Fund, Inc. (NYSE: MUI)
--$287,100,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 4, 2016.
The fund's issuance of the VMTP Shares closed today Friday Dec. 7, 2012. Proceeds received by the fund in connection with its issuance of the VMTP Shares have been deposited with the fund's tender and paying agent for the VRDP Shares for purposes of redeeming the fund's VRDP Shares in full (principal plus accrued but unpaid dividends) on the redemption date, Friday Dec. 21, 2012. Pursuant to this, as of today Friday Dec. 7, 2012, the fund's VRDP Shares are no longer deemed outstanding under the VRDP Shares' governing document, and therefore the fund's VRDP Shares will not be included in the fund's calculation of asset coverage ratio and effective leverage ratio (as described below). Fitch expects to mark the VRDP Shares as paid in full on Friday Dec. 21, 2012.
KEY RATING DRIVERS
The 'AAA' long-term primarily reflects:
--Sufficient asset coverage provided to the preferred shares as calculated per the fund's asset coverage tests;
--The structural protections afforded by mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the fund's operations;
--The capabilities of BlackRock Advisors, LLC. as investment advisor.
The fund is a closed-end management investment company regulated by the Investment Company Act of 1940. The fund seek to provide common shareholders with high current income exempt from federal income taxes by investing primarily in a portfolio of qualified municipal obligations.
Under normal market conditions, the fund expects to invest at least 75% of its total assets in a portfolio of municipal obligations rated at least 'BBB' by Fitch or equivalent or, if unrated, are considered by the fund's investment adviser to be of comparable quality. As a non-fundamental policy, under normal market conditions the fund also maintains a dollar-weighted average portfolio duration of three to 10 years. As of Nov 23, 2012, fund's total assets were $1,038 million. Leverage comprised approximately 38% of total assets, consisting of $287.1 million in rated preferred shares and $102.7 million in floating rate notes of tender option bonds.
As of end of November 2012, the fund's pro forma asset coverage ratio, as calculated in accordance with the Fitch total and net over-collateralization tests per the 'AAA' rating guidelines outlined in Fitch's criteria, was in excess of 100%, which is the minimum threshold required under the VMTP Shares' transactional documents.
As of the same date, the fund's asset coverage ratio for VMTP Shares, as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum asset coverage threshold of 225% as currently set by corresponding transactional documents.
The fund has also covenanted to maintain an effective leverage ratio for both the preferred shares and floating-rate certificates of tender option bonds below 45% (or 46% if the increase in the ratio is due exclusively to asset market value volatility). The fund's Effective Leverage Ratio is currently below 45%.
In the event of asset coverage decline, the VMTP Shares' transactional documents require the fund to reduce leverage in order to restore compliance with the particular test(s) breaching the required threshold(s).
BlackRock Advisors, LLC, a subsidiary of BlackRock, Inc., is the advisor to the fund, responsible for the overall investment strategies and their implementation. BlackRock, Inc. and its affiliates had approximately $3.673 trillion of assets under management as of Sept. 30, 2012.
The rating assigned to the VMTP Shares may be sensitive to material changes in the leverage composition, portfolio credit quality, portfolio diversification or market risk of the fund, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could result in a downgrade by Fitch.
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.
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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 this rating were the public domain and BlackRock Advisors, LLC.
Applicable Criteria and Related Research:
--'Municipal CEF Leverage Continues to Evolve' (Nov. 27, 2012);
--'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk' (Oct. 11, 2012)
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2012);
--'Municipal CEFs Refinance Pre-Crisis ARPS' (May 3, 2012);
--'Primer: CEF Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk
Rating Closed-End Fund Debt and Preferred Stock
Municipal CEFs Refinance Pre-Crisis ARPS
Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)
Municipal CEF Leverage Continues to Evolve