KBRA Affirms Ratings on Senior Notes and MRPS Issued by ClearBridge Energy Midstream Opportunity Fund Inc. and Assigns 'A' Ratings to MRPS Series S, Series T and Series U

NEW YORK--(BUSINESS WIRE)--KBRA affirms the ‘AAA’ rating assigned to the Senior Notes and affirms the 'A' rating assigned to Mandatory Redeemable Preferred Shares ("MRPS") issued by ClearBridge Energy Midstream Opportunity Fund Inc. (“EMO” or the “Fund”). The Outlook on all ratings is Stable. KBRA assigns 'A' rating to newly issued MRPS Series S, Series T and Series U with a Stable Outlook. The ratings continue to be supported by the asset coverage, the credit quality, liquidity of the underlying assets, and the management experience of the Fund's investment adviser, Franklin Templeton Fund Adviser, LLC, and subadviser, ClearBridge Investments, LLC. As of September 30, 2026, and pro forma of MRPS Series S, Series T and Series U issuances, senior asset coverage was 670% and total asset coverage was 427%. The Fund is registered under the Investment Company Act of 1940 (the “'40 Act”) and is a non-diversified closed end investment fund. The Fund had its Initial Public Offering on June 10, 2011, and its shares are listed on the New York Stock Exchange under the symbol EMO. The Fund invests primarily in equity securities of energy midstream entities structured as both partnerships and corporations.

Key Credit Considerations

• Asset Coverage: Regulatory requirements under the '40 Act, dictate minimum asset coverage ratios of 300% on senior debt and 200% on total leverage (with respect to senior debt and preferred stock) in order for EMO to maintain the ability to issue additional debt or preferred shares and pay dividends. Furthermore, EMO is not permitted to make distributions to common shareholders as per the financial covenants in its relevant purchase agreements, unless total asset coverage exceeds 225%, which highly incentivizes the Fund’s management to maintain its asset coverage cushion. Management has demonstrated its ability and willingness to meet these requirements with a goal to consistently exceed these levels and maintain downside cushion, and these requirements are reflected in the governing documents for the Senior Notes and MRPS. As of September 30, 2026, and pro forma of MRPS Series S, Series T and Series U issuances, '40 Act senior asset coverage and total asset coverage ratios were 670% and 427%, respectively (620% and 457% as of June 30, 2025).
• Asset Liquidity: The Fund’s governing documents require at least 80% of managed assets to be invested in energy midstream entities, structured as both partnerships and corporations. Up to 20% of EMO’s managed assets may be invested in securities of issuers that are not energy midstream companies. As the portfolio is invested mostly in publicly traded securities, the liquidity of the Fund’s assets is relatively strong.
• Valuation: EMO may invest up to 30% of its managed assets in unregistered or otherwise restricted securities, including up to 15% in non-public holdings. As these securities are not publicly traded, they require a more involved valuation process, which KBRA views as robust. However, the eventual exit price could differ meaningfully from EMO’s valuation. As of September 30, 2026, the Fund held no restricted or non-public securities and going forward such investments are expected to be minimal and only on an opportunistic basis.
• Non-Diversified Investments: EMO is a non-diversified closed-end investment fund which focuses primarily on energy midstream entities. As such, the Fund faces idiosyncratic risk which cannot be mitigated through industry diversification.
• Manager Experience: ClearBridge Investments is a global equity asset manager that is focused on active management. As of June 30, 2026, ClearBridge had approximately $208.6 billion in assets under management. Compared to managers of a similar scale and strategy, ClearBridge demonstrates similarly strong capabilities, familiarity, and investment experience in the energy midstream sector. However, in KBRA’s view, the experience and skill set of the investment team is concentrated and thus more reliant on key personnel for execution. ClearBridge Investments is a wholly owned subsidiary of Franklin Resources.

Rating Sensitivities

• Asset Coverage: A deterioration in asset coverage levels below '40 Act requirements and the Fund manager’s inability to liquidate assets and demonstrate intention to cure within the 30-day time period could result in a negative rating change. Conversely, a trend of stable asset performance coupled with improvements to asset coverage could result in positive rating changes.
• Industry Concentration: Further consolidation within the energy midstream industry resulting in more limited investment opportunities and a greater probability for performance correlations could result in negative rating changes.

To access ratings and relevant documents, click here.

Click here to view the report.

Methodology

• Funds: Investment Fund Debt Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Information on certain affiliations between directors of KBRA Ratings and rated entities or related third parties can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA’s Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the US Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. Kroll Bond Rating Agency Japan K.K. is registered as a CRA with the Japan Financial Services Agency. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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