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Fitch Affirms Western Asset Premier Bond Fund's $72MM Pfd Shares at 'A'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' rating assigned to the following auction market preferred shares (AMPS) that remain outstanding by Western Asset Premier Bond Fund (NYSE: WEA), a closed-end fund managed by Western Asset Management Company:

--$200,000 of AMPS, series M, consisting of eight shares, with a liquidation preference of $25,000 per share, to be redeemed September 26, 2014;

--$225,000 of AMPS, series W, consisting of nine shares, with a liquidation preference of $25,000 per share, to be redeemed Sept. 30, 2014.

On July 3, 2014, the fund completed a tender offer, where it redeemed 2,863 shares, or approximately 99% of total AMPS at a price equal to 97% of the liquidation preference of $25,000 per share using proceeds drawn from a credit facility. On Aug. 22, 2014, WEA filed an N-23C-2 form with the SEC to announce its intention to redeem the remaining 17 shares affirmed today, with series M to be redeemed on Sept. 26, 2014 and series W to be redeemed on Sept. 30, 2014, both at par. Upon successful redemption, Fitch will mark the shares as Paid in Full.

KEY RATING DRIVERS

The main drivers for the rating actions are:

--The asset coverage available to the AMPS;

--The structural protections afforded by mandatory collateral maintenance and deleveraging provisions in the event of asset coverage declines;

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

--The capabilities of Western Asset Management Company as investment adviser.

FUND INVESTMENT STRATEGY

The fund is a diversified, closed-end management investment company regulated by the Investment Company Act of 1940. The fund commenced investment operations on March 28, 2002. The fund's investment objective is to provide current income and capital appreciation by investing primarily in a diversified portfolio of investment grade bonds.

Under normal market conditions, the fund expects to invest substantially all (but in any event at least 80%) of its total managed assets in bonds and at least 65% of its total managed assets in bonds that at the time of investment are of investment grade quality. The fund may invest up to 35% of its total managed assets in bonds of below investment grade quality. The fund targets an average credit quality rating of 'BBB' and an average effective duration between 3.5 and seven years. The fund may invest in securities or instruments other than bonds (including preferred stock) and may invest up to 10% of its total managed assets in instruments denominated in currencies other than the U.S. dollar.

STRUCTURAL PROTECTIONS

Per the fund's operating documents, the sufficiency of asset coverage available to AMPS is measured on the basis of the 1940 Act Asset Coverage Test and the Basic Maintenance Amount Coverage Tests. As of July 31, 2014, the fund's 1940 Act Asset Coverage Test, which measures the market value of assets relative to AMPS, was in excess of 300%; the fund's governing documents require a minimum 1940 Act Asset Coverage Test of 200%. As of the same date, the fund's Basic Maintenance Amount Coverage Tests, which measure the discounted market value of assets relative to AMPS, were in excess of 100%, which are also minimum asset coverage ratios required by the fund's governing documents.

Should asset coverage tests decline below their minimum threshold amounts and not be cured within the pre-specified timeframe, the governing documents require the fund to deleverage or otherwise cure the violation through portfolio adjustment in a sufficient amount to restore compliance with the applicable asset coverage test(s).

THE ADVISOR

Western Asset Management Company acts as the adviser to the fund and is responsible for the fund's overall investment strategy and its implementation. Western Asset is a wholly owned subsidiary of Legg Mason Inc. As of June 30, 2014, Western Asset Management Company had approximately $469 billion of assets under management.

RATINGS SENSITIVITY

Should the portfolio materially migrate toward more risky assets, become more concentrated, leveraged, or undertake material exposures with derivative instruments, these could negatively impact Fitch's current rating on the AMPS.

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 U.S. closed-end funds, please review the criteria referenced below, which can be found on Fitch's website.

To receive complimentary closed-end fund research, 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).

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=858474

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.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Gwen Fink-Stone, +1 212-908-9128
Associate Director
or
Committee Chairman
Ralph Aurora, +1 212-908-0528
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com