Fitch Rates New Tortoise Closed-End Fund Notes 'AAA'; Affirms Existing Ratings

NEW YORK--()--Fitch Ratings assigns an 'AAA' rating to the following notes issued by three closed-end funds managed by Tortoise Capital Advisors, LLC. Fitch also affirms the existing notes and mandatory redeemable preferred stock (MRPS) as listed at the bottom of this press-release.

The following ratings are for the new note issuance by the funds:

Tortoise Energy Capital Corporation (NYSE: TYY):

--$20,000,000 series R floating rate senior notes due April 17, 2019.

Tortoise Energy Infrastructure Corp (NYSE: TYG):

--$35,000,000 series U floating rate senior notes due APRIL 17, 2019.

Tortoise MLP Fund (NYSE: NTG):

--$45,000,000 series H floating rate senior notes due APRIL 17, 2019;

--$10,000,000 2.77% series I senior notes due APRIL 17, 2018;

--$30,000,000 3.72% series J senior notes due April 17, 2021.

Fitch also notes that the following note related to NTG was paid in full on Dec. 15, 2013. The note was previously rated AAA by Fitch.

--$12,000,000 series A senior unsecured notes.

KEY RATING DRIVERS

The rating assignments and affirmations reflect:

--Sufficient pro forma asset coverage provided to notes and 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 Tortoise Capital Advisors, LLC as investment advisor.

FUNDS' PROFILE

TYY, NTG, and TYG are non-diversified, closed-end management investment companies sharing a similar investment goal of obtaining a high level of total return with an emphasis on current distributions. The funds invest the majority of their portfolios in equity securities of publicly-traded Master Limited Partnerships (MLP) and their affiliates in the energy infrastructure sector. These companies gather, transport, process, store, distribute or market natural gas, natural gas liquids, coal, crude oil, refined petroleum products or other natural resources, or explore, develop, manage or produce such commodities.

ASSET COVERAGE

As of Feb. 28, 2014, the funds' 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 notes and the 'AA' 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.

As of Feb. 28, 2014, the funds' asset coverage ratio for the notes, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), was in excess of 300%. The funds' pro forma asset coverage ratio for total leverage, including the MRPS, as calculated in accordance with the 1940 Act, was in excess of 200%. These are the minimum asset coverage ratios required by the 1940 Act and the fund's governing documents.

LEVERAGE

As of Feb. 28, 2014, TYG total assets were $2,294 million supporting $330 million of unsecured senior notes, $80 million of MRPS and $44 million of bank borrowing. As of the same date, TYY total assets were $1,182 million supporting $159.4 million of unsecured senior notes, $50 million of MRPS and $25.6 million of bank borrowing. NTG total assets were $1,988 million supporting $243 million of unsecured senior notes, $90 million of MRPS and $48 million of bank borrowing.

As of Feb. 28, 2014, the funds also carried a deferred tax liability (DTL) as a result of certain unrealized gains typically seen in MLP closed-end funds for tax purposes. To account for any residual risk dealing with the recognition of those gains upon sale, Fitch's rating criteria reduce the numerator of the Fitch OC Tests by 10% of the DTL. The 10% figure gives credit to the likely event that much of the currently existing unrealized gains would likely be eliminated or significantly reduced as a result of asset price declines in a stressed market scenario.

NOTES STRUCTURAL PROTECTIONS

Should the asset coverage tests decline below their minimum threshold amounts (as tested on the last business day of each week), under the terms of the notes the fund is required to deliver notice to the note purchasers within five business days. The fund manager is then expected 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 the 1940 Act test breaches) within a pre-specified time period (a maximum of 47 calendar days for the Fitch OC Tests and a longer period for the 1940 Act test).

Failure to cure an asset coverage breach as described above is an event of default under the terms of the notes. The fund must then deliver a notice within five business days to the note purchasers and a majority vote of note purchasers may then declare all the notes then outstanding to be immediately due and payable.

The fund is also prohibited from paying out a common stock dividend if it fails to cure a breach to the notes' 300% 1940 Act asset coverage test. Fitch views this as an added incentive to cure and deleverage in a timely manner, regardless of acceleration by the notes purchasers.

MRPS STRUCTURAL PROTECTIONS

Should the MRPS Asset Coverage Test and Fitch OC Test decline below their minimum threshold amounts (as tested weekly) the funds are 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 Asset Coverage Test breaches) within a pre-specified time period (a maximum of 47 calendar days).

THE ADVISOR

Tortoise, a wholly owned subsidiary of Tortoise Holdings, LLC, is the fund's investment adviser, responsible for the fund's overall investment strategy and its implementation. The advisor was formed in October 2002 and, as of March 31, 2014, it had approximately $15.5 billion in assets under management. Montage Asset Management, LLC, a wholly-owned entity of Mariner Holdings, LLC owns approximately 61% of Tortoise Holdings, LLC, with the remaining interest held by certain senior Tortoise employees.

CONCURRENT RATING AFFIRMATIONS

Fitch affirms the following ratings:

Tortoise Energy Infrastructure Corporation (TYG):

--$110,000,000 6.11% Series E senior notes due on April 10, 2015 at 'AAA';

--$30,000,000 5.85% Series G senior notes due on Dec. 21, 2016 at 'AAA';

--$15,000,000 Series H floating rate senior notes due on May. 12, 2014 at 'AAA';

--$10,000,000 4.35% Series I senior notes due on May. 12, 2018 at 'AAA';

--$15,000,000 3.30% Series J senior notes due on Dec. 19, 2019 at 'AAA';

--$10,000,000 3.87% Series K senior notes due on Dec. 19, 2022 at 'AAA';

--$20,000,000 3.99% Series L senior notes due on Dec. 19, 2024 at 'AAA';

--$13,000,000 2.75% Series M senior notes due on Sept. 27, 2017 at 'AAA';

--$10,000,000 3.15% Series N senior notes due on Sept. 27, 2018 at 'AAA';

--$15,000,000 3.78% Series O senior notes due on Sept. 27, 2020 at 'AAA';

--$12,000,000 4.39% Series P senior notes due on Sept. 27, 2023 at 'AAA';

--$10,000,000 Series Q floating rate senior notes due on Sept. 27, 2018 at 'AAA';

--$25,000,000 3.77% SERIES R senior notes due on Jan. 22, 2022 AT 'AAA';

--$10,000,000 3.99% SERIES S senior notes due on Jan. 22, 2023 AT 'AAA';

--$25,000,000 4.16% SERIES T senior notes due on Jan. 22, 2024 AT 'AAA';

--$80,000,000 of series B MRPS with a liquidation preference of $10 per share due on Dec. 31, 2027 at 'AA'.

Tortoise Energy Capital Corporation (TYY):

--$39,400,000 6.07% Series D senior unsecured notes due on Dec 21, 2014 at 'AAA';

--$5,000,000 Series G Floating Rate Senior Notes due on June 15, 2014 at 'AAA';

--$12,500,000 3.88% Series H senior notes due on June 15, 2016 at 'AAA';

--$12,500,000 4.55% Series I senior notes due on June 15, 2018 at 'AAA';

--$12,500,000 2.77% Series J senior notes due on June 14, 2020 at 'AAA';

--$12,500,000 2.98% Series K senior notes due on June 14, 2021 AT 'AAA';

--$10,000,000 3.48% Series L senior notes due on June 14, 2025 AT 'AAA';

--$12,000,000 2.75% Series M senior notes due on Sept. 27, 2017 AT 'AAA';

--$15,000,000 3.48% Series N senior notes due on Sept. 27, 2019 at 'AAA';

--$13,000,000 4.21% Series O senior notes due on Sept. 27, 2022 at 'aaa';

--$5,000,000 Series P floating rate senior notes due on Sept. 27, 2018 at 'AAA';

--$10,000,000 4.16% series Q senior notes due on Nov. 22, 2023 at 'AAA';

--$50,000,000 of series C MRPS with a liquidation preference of $10 per share due on Mar. 1, 2018 at 'AA'.

TORTOISE MLP FUND (NTG):

--$24,000,000 3.14% Series B senior notes due on Dec. 15, 2015 at 'AAA';

--$57,000,000 3.73% Series C senior notes due on Dec. 15, 2017 at 'AAA';

--$112,000,000 4.29% Series D senior notes due on Dec. 15, 2020 at 'AAA';

--$25,000,000 Series E floating rate senior notes due on Dec. 15, 2015 at 'AAA';

--$15,000,000 Series F Floating Rate Senior Notes due on May 12, 2014;

--$10,000,000 4.35% Series G Senior Notes due on May 12, 2018;

--$25,000,000 of series A MRPS due on Dec. 15, 2015 at 'AA';

--$65,000,000 of series B MRPS due on Dec. 15, 2017 at 'AA'.

RATINGS SENSITIVITY

The rating is based on the terms stipulating mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines. In the case of the rated notes, should the fund fail to cure an asset coverage breach, or the note purchasers not declare the notes due and payable upon an event of default, this may lengthen exposure to market value risk and cause the ratings to be lowered by Fitch.

The ratings may also 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.

To receive forthcoming complimentary closed-end fund research from Fitch, opt-in at the following link:

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

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

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

--'MLP Closed-End Funds: A Capital Structure Case Study' (Dec. 2, 2013);

--'2014 Outlook: U.S. Closed-End Fund Leverage' (Jan 14, 2014).

Applicable Criteria and Related Research:

2014 Outlook: U.S. Closed-End Fund Leverage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=730159

MLP Closed-End Funds: A Capital Structure Case Study

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723839

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=827257

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
Yuriy Layvand, CFA, +1-212-908-9191
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Michael Swan, +1-212-908-9108
or
Committee Chairperson
Ian Rasmussen, +1-212-908-0232
Senior Director
or
Media Relations
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Yuriy Layvand, CFA, +1-212-908-9191
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Michael Swan, +1-212-908-9108
or
Committee Chairperson
Ian Rasmussen, +1-212-908-0232
Senior Director
or
Media Relations
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com