NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned a AAA rating to the Senior Unsecured Notes and A+ rating to the Mandatory Redeemable Preferred Shares (MRPS) issued by the Kayne Anderson MLP Investment Company (KYN or “the Fund”). The ratings reflect the Fund’s preliminary closed-end fund rating as measured by the key closed-end fund (CEF) rating determinants, including the CEF’s PQR, based on the KBRA credit quality rating matrix (as measured by the credit quality of the underlying instruments that comprise the portfolio); asset coverage; liquidity; and duration. Additionally, the ratings are influenced by the results of the qualitative assessment of the investment advisor of the Fund, KA Fund Advisors (KAFA). The qualitative shadow rating (QSR) for the investment advisor was found to be strong. This produced an intermediate K Score and final CEFR of AAA for the senior notes, and after a priority of claim and qualitative adjustments, a A+ final CEFR for the MRPS.
Kayne Anderson MLP Investment Company was organized as a Maryland corporation in June 2004 as a non-diversified, closed-end management investment company by its sponsor Kayne Anderson Capital Advisors. The Fund commenced operations on September 2004, and its common shares are listed on the New York Stock Exchange under the symbol KYN. As of March 31, 2017, KYN had approximately $4.2 billion in assets under management, with total leverage, in the form of a term loan, notes, and MRPS, of around $1.1 billion.
The Fund’s objective is to obtain a high after-tax total return by investing in energy-related master limited partnerships and their affiliates (MLPs), and in other companies that, as their principal business, operate assets used in the gathering, transporting, processing, storing, refining, distributing, mining, or marketing of natural gas, natural gas liquids, crude oil, refined petroleum products, or coal.
The Fund has detailed investment parameters and guidelines, including that management intends to invest at least 80% of its total assets in MLPs, with at least 50% of those total assets in publicly traded securities of MLPs and other midstream energy companies. Furthermore, the Fund is restricted to up to 20% maximum invested in debt securities of MLPs and other Mmdstream energy companies including below investment grade debt securities rated at least B-. Lastly, the Fund has a maximum of 5% allowed in investments that are unrated or rated below B-.
The Fund is allowed, per the 1940 Investment Act and Fund prospectus, to utilize leverage as it seeks to meet its investment objectives. The Fund’s targeted leverage, in the form of an advantageous mix of term loans and revolving credit facility (credit facilities), MRPS and notes is an aggregate amount of approximately 25% - 30% of the Fund’s total assets. As of March 31, 2017, KYN had total leverage of $1.1 billion, including approximately a $72 million outstanding under a $150 million term loan, $767 million in notes, and $300 million in MRPS, representing, total leverage of around 27% of total assets.
Under the ‘40 Act, the Fund is not permitted to borrow (senior debt) unless immediately after the borrowing the value of the Fund’s total assets (less all liabilities not represented by indebtedness and preferred shares) is at least 300% of the principal amount of the borrowings. Additionally, under the ‘40 Act, the Fund is not permitted to issue preferred shares unless immediately after the such issuance the value of the Fund’s asset coverage is at least 200% of the liquidation value of the outstanding indebtedness and preferred shares. As of March 31, 2017, KYN reported asset coverage for senior securities of 416%, and total leverage (debt and preferred stock) asset coverage of 306%, well above ‘40 Act minimum requirements for their respective measures.
Founded in 1984, Kayne Anderson is an alternative investment-management firm. The firm is known for its focus on investing in upstream oil and gas companies and energy infrastructure, but also specializes in other niche markets such as specialized real estate, as well as middle market credit and growth private equity. The Fund is managed by KAFA, a subsidiary of Kayne Anderson, and an SEC-registered investment adviser. KAFA is responsible for investment management mandates within the Kayne Anderson platform that predominantly involve energy marketable securities. As of March 31, 2017, Kayne Anderson reported approximately $26 billion in assets under management, with an investor base that includes institutional and retail clients, family offices, and high-net-worth individuals. The firm has over 300 employees, with main offices in Los Angeles and Houston, as well as other locations in New York, Chicago, Denver, Atlanta, Dallas, and Boca Raton.
Ratings assigned:
| Senior Notes | Rate | Maturity | Rating | |||
| W | 4.38% | 5/26/2018 | AAA | |||
| Y | 2.91% | 5/3/2017 | AAA | |||
| Z | 3.39% | 5/3/2019 | AAA | |||
| AA | 3.56% | 5/3/2020 | AAA | |||
| BB | 3.77% | 5/3/2021 | AAA | |||
| CC | 3.95% | 5/3/2022 | AAA | |||
| DD | 2.74% | 4/16/2019 | AAA | |||
| EE | 3.20% | 4/16/2021 | AAA | |||
| FF | 3.57% | 4/16/2023 | AAA | |||
| GG | 3.67% | 4/16/2025 | AAA | |||
| II | 2.88% | 7/30/2019 | AAA | |||
| JJ | 3.46% | 7/30/2021 | AAA | |||
| KK | 3.93% | 7/30/2024 | AAA | |||
| LL | 2.89% | 10/29/2020 | AAA | |||
| MM | 3.26% | 10/29/2022 | AAA | |||
| NN | 3.37% | 10/29/2023 | AAA | |||
| OO | 3.46% | 10/29/2024 | AAA | |||
|
Mandatory |
Rate | Maturity | Rating | |||
| B | 4.53% | 11/9/2017 | A+ | |||
| C | 5.20% | 11/9/2020 | A+ | |||
| F | 3.50% | 4/15/2020 | A+ | |||
| H | 4.06% | 7/30/2021 | A+ | |||
| I | 3.86% | 10/29/2022 | A+ | |||
| J | 3.36% | 11/9/2021 | A+ | |||
The ratings are based on KBRA’s Global Investment Funds Rating Methodology published on August 10, 2016.
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