Fitch Rates DNP Select Income Fund Shares 'AAA'

NEW YORK--()--Fitch Ratings has assigned an 'AAA' rating to the following new series of mandatory redeemable preferred stock (MRPS) issued by DNP Select Income Fund Inc. (NYSE: DNP), a non-diversified closed-end fund managed by Duff & Phelps Investment Management Co. (DPIM)

--$132,000,000 of series A MRPS, due 2019;

--$60,000,000 of series B MRPS, due 2021;

--$75,000,000 of series C MRPS, due 2024.

The sale of the privately placed series A, B & C MRPS has closed on Feb. 19, 2014 and net proceeds of approximately $267 million from the offering will be used to redeem the fund's outstanding remarketed preferred shares and to reduce the fund's borrowings under its credit facility.

KEY RATING DRIVERS

The 'AAA' rating assignment reflects:

--Sufficient pro forma asset coverage provided to MRPS 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 DPIM as fund adviser.

ASSET COVERAGE

At closing, the fund's pro forma asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC tests) per the 'AAA' rating guidelines for the MRPS, outlined in Fitch's closed-end fund criteria, were in excess of 100%. These are the minimum asset coverage guideline required by the fund's governing documents, and evaluated as such by Fitch to arrive at the assigned rating levels.

At closing, the fund's asset coverage ratio for total leverage, including the MRPS, as calculated in accordance with the Investment Company Act of 1940, was in excess of 225%. Also at closing, the fund's asset coverage ratio for total debt, as calculated in accordance with the Investment Company Act of 1940, was in excess of 300%. These are the minimum asset coverage ratios required by the 1940 Act and the fund's governing documents.

STRUCTURAL PROTECTIONS

Should the MRPS asset coverage tests decline below their minimum threshold amounts (as tested weekly) the fund is required to deliver notice to the MRPS purchasers within five days of becoming aware of such fact.

The fund manager is required to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC Tests breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC Tests and 1940 Act asset coverage test breaches) within a pre-specified time period (a maximum of 45 business days).

THE FUND

The fund's objectives are current income and long-term growth of income with capital appreciation as a secondary objective. The Fund seeks to achieve its investment objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industry. The Fund's investment strategies have been developed to take advantage of the income and growth characteristics and historical performances of securities of companies in the public utilities industry. Under normal conditions, more than 65% of the Fund's total assets will be invested in securities of public utility companies engaged in the production, transmission or distribution of electric energy, gas or telephone services.

THE FUND'S ADVISER

DPIM is responsible for the implementation and execution of the investment strategy on a day-to-day basis. DPIM is an SEC registered and regulated investment advisor with $9.3 billion in assets under management as of Sept. 30, 2013. DPIM acts as investment adviser to three other closed-end investment companies and five open-end investment companies registered under the 1940 Act.

RATINGS SENSITIVITY

The rating assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the fund, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered 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'.

The sources of information used to assess this rating were the public domain and DPIM.

Opt-in to receive Fitch's forthcoming research on closed-end funds:

http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/

Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716220

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821046

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Russ Thomas, +1-312-368-3189
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL, 60602
or
Secondary Analyst
Yuriy Layvand, CFA, +1-212-908-9191
or
Committee Chairperson
Ian Rasmussen, +1-212-908-0232
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Russ Thomas, +1-312-368-3189
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL, 60602
or
Secondary Analyst
Yuriy Layvand, CFA, +1-212-908-9191
or
Committee Chairperson
Ian Rasmussen, +1-212-908-0232
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com