Fitch Affirms Neuberger Berman Real Estate Securities Income Fund Preferred Stock at 'AA'

NEW YORK--()--Fitch Ratings has affirmed the 'AA' rating assigned to the mandatory redeemable preferred stock (MRPS) issued by Neuberger Berman Real Estate Securities Income Fund Inc. (NYSE MKT: NRO) a closed-end fund advised by Neuberger Berman Management LLC (Advisor):

--$25,000,000 4.00% series A MRPS, due Sept. 26, 2017.

KEY RATING DRIVERS

The rating affirmation 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 Neuberger Berman Management LLC as investment Advisor.

FUND PROFILE

NRO is a closed-end management investment company. The fund commenced its operations on Oct. 28, 2003. The fund's primary investment objective is high current income and its secondary investment objective is capital appreciation. The fund's investment strategy is to manage a portfolio with a broad mix of real estate securities through superior stock selection and property sector allocation.

FUND LEVERAGE

As of Aug. 29, 2014, the fund managed approximately $440 million in assets, consisting of 67% in REIT common stock and 33% in REIT preferred stock. The total leverage ratio is approximately 24%, which consists of approximately $80 million bank borrowing and $25 million Fitch-rated MRPS.

ASSET COVERAGE

The fund's asset coverage ratio, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC tests) per 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.

The Fitch OC tests calculate standardized asset coverage by applying haircuts to portfolio holdings based on riskiness and diversification of the assets and measuring their ability to cover both on- and off-balance-sheet liabilities at the stress level that corresponds to the assigned rating.

The fund's asset coverage ratio for senior credit facility, as calculated in accordance with the Investment Company Act of 1940 (1940 Act) at current market value, was in excess of 300%. The fund's pro forma asset coverage ratio for total leverage, including the MRPS, as calculated in accordance with the 1940 Act also at current market value, was in excess of 200%. These are the minimum asset coverage ratios required by the fund's governing documents.

STRUCTURAL PROTECTIONS

Should the asset coverage tests for the MRPS decline below their minimum threshold amounts and are not cured in a pre-specified timeframe, the transactional documents require the funds to reposition portfolio assets or reduce leverage in a sufficient amount to restore compliance with the applicable tests. The allotted time to restore compliance to the asset coverage tests is consistent with Fitch's 60 business day criteria guideline.

THE ADVISOR

Neuberger Berman Management LLC is an indirect subsidiary of Neuberger Berman Group LLC, which is a private, independent, employee-controlled investment manager founded in 1939. The firm has more than 2000 employees and managed $257 billion in assets across equities, fixed income and other alternative investments as of June 30, 2014.

RATINGS SENSITIVITIES

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.

To receive Fitch's forthcoming research on closed-end funds please go to: http://forms.fitchratings.com/forms/FAMCEFOptinform

Additional information is available at 'www.fitchratings.com'.

The sources of information used to assess these ratings were the public domain and Neuberger Berman Management LLC.

Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Sept. 4, 2014).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=765528

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=875814

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Contacts

Fitch Ratings
Primary Analyst
Yuriy Layvand, CFA, +1 212-908-9191
Director
Fitch Ratings, Inc.
Whitehall Street
New York, NY 10004
or
Secondary Analyst
Benjamin Han, +1 212-908-9177
Analyst
or
Committee Chairperson
Ralph Aurora, +1 212-908-0528
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Yuriy Layvand, CFA, +1 212-908-9191
Director
Fitch Ratings, Inc.
Whitehall Street
New York, NY 10004
or
Secondary Analyst
Benjamin Han, +1 212-908-9177
Analyst
or
Committee Chairperson
Ralph Aurora, +1 212-908-0528
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com