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Fitch Updates Rating Criteria for U.S. Closed-End Funds

NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=765528

Fitch Ratings today published updated rating criteria for debt and preferred stock issued by U.S. closed-end funds (CEFs), as well as related market value structures. This criteria report updates and replaces the master criteria report titled 'Rating Closed-End Fund Debt and Preferred Stock,' dated Aug. 14, 2013.

The core rating methodology remains intact with the following key change:

-- Foreign currency denominated assets held in excess of 25% of portfolio's total market value are subject to an additional 1.1x multiple to the standard discount factor. This treatment applies to foreign currencies of investment grade countries, exposures to sub-investment grade country currencies continue to receive no credit or are evaluated on a case-by-case basis. This change reflects Fitch's updated view on the impact of currency volatility on collateral market values. Fitch expects no ratings changes as a result of the criteria update, although portfolios concentrated in foreign currencies will show declines in Fitch overcollateralization (OC) tests for rated notes and preferred stock.

KEY RATING DRIVERS

Fitch's total and net OC tests outlined in the criteria measure the ability of a CEF (or related other value structure) to redeem debt and preferred stock through liquidation of portfolio assets during stressed market conditions. The tests also reflect the amount of portfolio diversification, the degree of subordination risk for rated leverage, and the full leverage profile of the fund (including economic leverage from the use of derivatives).

Other Key Rating Drivers:

--Fund limits to leverage stemming from regulatory asset coverage or other leverage/asset coverage tests.

--The presence of dynamic deleveraging/defeasance triggers;

--The amount of risk-adjusted OC available to rated debt and preferred stock;

--The liquidity, historic volatility and diversification of portfolio assets;

--The capabilities of the investment manager to successfully manage fund investment and leverage strategies;

--Legal/regulatory parameters that govern fund operations.

The criteria report, titled 'Rating Closed-End Fund Debt and Preferred Stock' (Sept. 4, 2014), is available at 'www.fitchratings.com'.

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 Puerto Rico Closed-End Debt and Preferred Stock' (Sept. 4, 2014);

--'Rating Market Value Structures' (Sept. 4, 2014);

--'Rating Debt and Preferred Securities Issued by Non-US Closed-End Funds' (March 18, 2014).

Applicable Criteria and Related Research:

Rating Debt and Preferred Securities Issued by Non-US Closed-End Funds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=741215

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
Media Relations
Brian Bertsch, New York
Tel: +1 212-908-0549
Email: brian.bertsch@fitchratings.com
or
Yuriy Layvand, CFA
Director
+1-212-908-9191
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Ian Rasmussen
Senior Director
+1-212-908-0232