News Column

Fitch Rates Nuveen Muni CEF Preferred Shares

July 1, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings takes the following rating actions on the Variable Rate MuniFund Term Preferred Shares (VMTP Shares) issued by Nuveen Massachusetts Premium Income Municipal Fund (NYSE: NMT) in connection with the refinancing described below:

--$74,000,000 of VMTP Shares, Series 2017, term redemption on Aug. 1, 2017, rated 'AAA'.

The fund is a municipal closed end fund managed by Nuveen Fund Advisors, LLC (NFA) and subadvised by Nuveen Asset Management, LLC (NAM).

KEY RATING DRIVERS

The 'AAA' long-term ratings of the VMTP Shares of NMT primarily reflect:

--Sufficient asset coverage provided to the preferred shares as calculated per the fund's over-collateralization (OC) tests;

--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;

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

--Both the short- and long-term ratings also reflect the capabilities of NFA as investment advisor and NAM as subadvisor.

THE REFINANCINGS

The fund will use the proceeds of the VMTP Share issuances to fully refinance all of its outstanding MuniFund Term Preferred Shares (MTP) Shares. Fitch expects the proceeds of the newly issued VMTP Shares to be deposited irrevocably in an escrow account with the MTP Shares redemption agent pending the required 10-day notification period to the MTP shareholders and accordingly the issuance of new VMTP Shares will not adversely affect the ratings of the MTP Shares while they remain outstanding. The amount deposited with the fund's redemption agent will equal at least the liquidation preference of the MTP Shares and any accrued and unpaid dividends. When the notification requirement has passed, the outstanding MTP Shares are expected to be redeemed using the escrowed VMTP Share proceeds and then marked paid in full by Fitch.

OVER-COLLATERALIZATION TESTS

As of May 30, 2014, the fund's asset coverage ratio for total outstanding preferred shares, as calculated in accordance with the Investment Company Act of 1940, was in excess of the Minimum Asset Coverage of 225% required by the fund's governing documents for the VMTP Shares.

As of the same date, the fund's Effective Leverage Ratio was below the 45% maximum Effective Leverage tests allowed by the fund's governing documents for the VMTP Shares.

STRUCTURAL PROTECTIONS

Compliance with the Asset Coverage and Effective Leverage thresholds is tested periodically. A breach of the Asset Coverage threshold requires the fund to redeem sufficient VMTP Shares to restore compliance. A breach of the Effective Leverage threshold requires the fund to redeem a sufficient number of VMTP Shares or reduce the amount of tender option bonds (TOBs) in order to restore compliance.

For the Asset Coverage and Effective Leverage Ratio tests, the total market value exposure periods (i.e. the pre-specified time period allotted for valuation, cure and redemption in the event of a breach) are within the 60 business day Fitch criteria guidelines.

STRESS TESTS

Fitch performed various stress tests on the fund to assess the strength of the structural protections available to the VMTP Shares compared to the stresses outlined in Fitch's closed-end fund rating criteria. These tests included determining various 'worst case' scenarios where the fund's leverage and portfolio composition migrated to the outer limits of the fund's operating and investment guidelines.

Only under remote circumstances, such as increasing the fund's issuer concentration, while simultaneously migrating the portfolio to a mix of 80% long-term 'BBB' bonds and 20% high yield bonds, did the asset coverage available to the preferred shares fall below the 'AAA' long-term rating level, and instead passed at an 'AA' long-term rating level.

Given the relative conservatism of the stress scenarios, and the minimal rating impact, Fitch views the fund's permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AAA' long-term rating.

THE FUND

The fund is a closed-end management investment company regulated by the Investment Company Act of 1940. The investment advisor is NFA, a subsidiary of Nuveen Investments. NFA is responsible for the fund's overall investment strategies and their implementation. The sub-advisor, NAM, is a subsidiary of NFA that oversees the day-to-day operations of the fund. Nuveen Investments and its affiliates had nearly $225 billion of assets under management as of March 31, 2014.

RATINGS SENSITIVITY

The rating assigned to the VMTP Shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the fund, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered by Fitch.

The fund has the ability to assume economic leverage through derivative transactions which may not be captured by the fund's Minimum Asset Coverage test or Effective Leverage Ratio. The fund does not currently engage in derivative activities and does not envision engaging in material amounts of such activity in the future. In fact, such activity is limited by the fund's investment guidelines and could run counter to the fund's investment objectives of achieving tax-exempt income. Material derivative exposure in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.

For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by a closed-end fund, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.

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

The sources of information used to assess this rating were the public domain and Nuveen Fund Advisors.

Opt-in to receive Fitch's forthcoming research on closed-end fund:

http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/

Applicable Criteria and Related Research:

--'Fitch: Minimal Impact on Nuveen CEFs from TIAA Acquisition' (April 15, 2014);

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013);

--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 8, 2012);

--'Municipal Closed-End Fund Diversify Funding and Moderate Rollover Risk' (Oct. 11, 2012);

--'Municipal CEFs Refinance Pre-Crisis ARPS' (May 3, 2012).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

Global Rating Criteria for Asset-Backed Commercial Paper

Applicable Criteria and Related Research:

Global Rating Criteria for Asset-Backed Commercial Paper

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721566

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837531

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.



Fitch Ratings

Primary Analyst

Ralph Aurora, +1-212-908-0528

Senior Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Russ Thomas Director, +1-312-368-3189

or

Committee Chairperson

Ian Rasmussen, +1-212-908-0232

Senior Director

or

Media Relations

Brian Bertsch, +1-212-908-0549 (New York)

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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