NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns 'AAA' long-term ratings and 'F1+' short-term ratings to variable rate demand preferred shares (VRDP shares) issued by Nuveen Municipal Market Opportunity Fund, Inc. (NMO), a municipal closed-end fund managed by Nuveen Fund Advisors, Inc. (NFA) and subadvised by Nuveen Asset Management, LLC (NAM):
--$350,900,000 of VRDP shares, series 1, mandatory redemption date of March 1, 2040, with a liquidation preference of $100,000 per share.
KEY RATING DRIVERS
The 'F1+' short-term rating primarily reflects:
--The credit strength of Deutsche Bank AG (rated 'A+/F1+' by Fitch), acting through its New York branch, as liquidity provider.
--The terms and conditions of the VRDP shares purchase agreement (purchase agreement).
The 'AAA' long-term rating primarily reflects:
--Sufficient asset coverage provided to the VRDP 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.
TENDER AND REMARKETING
The VRDP shares benefit from a demand feature giving investors the right to tender the securities with a seven-day notice for remarketing. The VRDP shares are also subject to a mandatory tender for remarketing upon the occurrence of certain events, such as non-payment of dividends by the fund, among others. VRDP shares that are unsuccessfully remarketed are purchased by the liquidity provider, Deutsche Bank AG, acting through its New York branch, pursuant to an unconditional demand feature.
The VRDP shares have a 30-year mandatory redemption date and pay an adjustable dividend rate set weekly by the remarketing agent, Morgan Stanley & Co. LLC (or any subsequent replacement). Should a remarketing be unsuccessful, the dividend rate will reset to a maximum rate as defined in the governing documents.
PURCHASE OBLIGATION
The VRDP shares are supported by a purchase agreement to ensure full and timely repayment of the liquidation preference amount plus any accumulated and unpaid dividends to holders upon occurrence of certain events. The agreement requires the liquidity provider to purchase all VRDP shares tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP shares if the fund has not obtained an alternate purchase agreement prior to the termination of the purchase agreement being replaced or following the downgrade of the liquidity provider's rating below 'F2' (or equivalent).
The purchase of VRDP shares pursuant to the purchase agreement is unconditional and irrevocable, and as such the short-term ratings assigned to the VRDP shares are directly linked to the short-term creditworthiness of the associated liquidity provider.
The liquidity provider's obligation under the purchase agreement is currently scheduled to terminate on March 30, 2012. Fitch expects the purchase agreement to be subsequently extended, with terms that are substantially similar to the current purchase agreement.
LEVERAGE
As of Dec. 30, 2011, the fund had managed assets of $1,006.6 million including leverage of $416.5 million. Leverage consisted of $350.9 million of VRDP shares and $65.6 million of floating rate certificates of tender option bonds.
ASSET COVERAGE
The fund's asset coverage ratio for the VRDP shares, as calculated in accordance with the Investment Company Act of 1940, was approximately 281%. This is in excess of the minimum asset coverage threshold of 225% currently set by the terms of the fee agreement between the fund and the liquidity provider (Minimum VRDP Asset Coverage Test).
The fund has also covenanted with the liquidity provider to maintain an Effective Leverage Ratio for both VRDP shares and floating-rate certificates of tender option bonds below 45% (or 46% if the increase in the ratio is due exclusively to asset market value volatility). The Effective Leverage Ratio is currently approximately 41%.
In the event of asset coverage declines, the fund's governing documents will require the fund to reduce leverage in order to restore compliance with the OC test(s) breaching the required threshold(s).
STRESS TESTS
Fitch performed various stress tests on the fund to assess the strength of the structural protections available to the VRDP shares compared to the rating 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 its operating and investment guidelines.
Only under remote circumstances, such as increasing the fund's issuer concentration, while simultaneously migrating the portfolio to 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds, did the asset coverage available to the VRDP Shares fall below the 'AAA' threshold, and instead passed at an 'AA' rating level.
Given the highly unlikely nature 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' rating.
THE FUND
The fund is a closed-end management investment company regulated by the Investment Company Act of 1940. The fund seeks to provide current income exempt from regular federal income tax and to enhance portfolio value. The fund currently invests primarily in investment grade quality municipal bonds.
NFA, a subsidiary of Nuveen Investments, is the fund's investment advisor, responsible for the fund's overall investment strategy and its implementation. NAM is a subsidiary of NFA and oversees the day-to-day operations of the fund. Nuveen Investments and its affiliates had approximately $207 billion of assets under management as of Oct. 31, 2011.
RATINGS SENSITIVITY
The ratings assigned to the VRDP 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 ratings to be lowered by Fitch.
Certain terms of the Minimum VRDP Shares Asset Coverage Test and Effective Leverage Ratio are set in the liquidity and fee agreements, which are renewed on a periodic basis. Changes to these terms that weaken the tests may have negative rating implications.
The short-term ratings assigned to the VRDP shares may also be sensitive to changes in the financial condition of the liquidity provider. A downgrade of the liquidity provider to 'F2' would result in a downgrade of the short-term ratings of the VRDP shares to 'F2,' absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating of the VRDPs, given the acceleration features in the transaction that would result in a mandatory tender of the VRDPs for purchase by the liquidity provider.
The fund has the ability to assume economic leverage through derivative transactions which may not be captured by the fund's Minimum VRDP 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 objective of achieving tax-exempt income. Material derivative exposures in the future could have potential negative rating implications if it adversely affects asset coverage available to rated VRDP shares.
For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by 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 ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess this rating were the public domain and Nuveen Fund Advisors.
To receive Fitch's forthcoming research on closed-end funds please go to:http://forms.fitchratings.com/forms/FAMCEFOptinform
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);
--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 10, 2011);
--'2012 Outlook: Closed-End Fund Leverage' (Dec. 19, 2011);
--'Closed-End Funds: Derivatives Under Review' (Nov. 16, 2011);
--'Primer: CEF Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Global Rating Criteria for Asset-Backed Commercial Paperhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=655450
2012 Outlook: Closed-End Fund Leveragehttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=660709
Closed-End Funds: Derivatives Under Review (Increased Use and Limited Transparency Are Key Considerations)http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656591
Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654295
Rating Closed-End Fund Debt and Preferred Stockhttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840
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 RatingsPrimary AnalystGreg Fayvilevich, +1-212-908-9151Associate DirectorFitch, Inc.One State Street PlazaNew York, NY 10004orSecondary AnalystRuss Thomas, +1-312-368-3189DirectororCommittee ChairpersonViktoria Baklanova, CFA, +1-212-908-9162Senior DirectororMedia RelationsBrian Bertsch, +1-212-908-0549 (New York)brian.bertsch@fitchratings.com
Source: Fitch Ratings
WASHINGTON, Feb. 10, 2012 /PRNewswire-USNewswire/ -- Shanna L. Smith, President and CEO of the National Fair Housing Alliance, made the following statement today in response to the City of St. Paul's withdrawal of its fair housing case from the U.S. Supreme Court:
"The National Fair Housing Alliance is proud to stand in solidarity with the City of Saint Paul today. We congratulate the City on its thoughtful leadership decision to remove its appeal in Magner v. Gallagher due to the potentially catastrophic, unintended consequences of a case challenging the 'disparate impact' theory under the Fair Housing Act.
"The Fair Housing Act has a dual mission: to eliminate housing discrimination and to promote diverse, inclusive communities. As such, the law covers both intentional discrimination as well as policies that have a discriminatory impact, even if they may appear neutral. Disparate impact claims under the Fair Housing Act are critical to addressing systemic housing discrimination and segregation in the United States.
"Civil rights advocates and the U.S. government have utilized disparate impact under the Fair Housing Act for over 40 years to help address mortgage lending and insurance redlining practices, and discriminatory zoning ordinances. Disparate impact has proven to be an invaluable tool in protecting the housing rights of all people.
"The City's decision will keep this vital part of the law viable for future generations."
About the National Fair Housing Alliance (www.nationalfairhousing.org)
Founded in 1988 and headquartered in Washington, DC, the National Fair Housing Alliance is a consortium of more than 220 private, non-profit fair housing organizations, state and local civil rights agencies, and individuals from throughout the United States. Through comprehensive education, advocacy and enforcement programs, NFHA protects and promotes residential integration and equal access to apartments, houses, mortgage loans and insurance policies for all residents of the nation.
SOURCE National Fair Housing Alliance
AUSTIN, Texas--(BUSINESS WIRE)-- Fitch Ratings assigns an initial 'AA+' rating to the following city of Sugar Land, TX (the city) revenue bonds:
--Approximately $22.4 million waterworks and sewer system revenue bonds, series 2012.
The bonds are expected to sell competitively the week of Feb. 21, 2012. Proceeds will be used to fund extensions and improvements to the city's system and pay costs of issuance.
In addition, Fitch assigns an initial 'AA+' rating to $66.2 million of outstanding waterworks and sewer system revenue bonds.
The Rating Outlook is Stable.
SECURITY
The bonds are secured and payable from a first lien on and pledge of the net revenues of the waterworks and sewer system (the system).
KEY RATING DRIVERS
CONSISTENTLY STRONG OPERATIONS: Financial performance has been strong, characterized by high debt service coverage consistently over 2.0 times (x) over the past five years and good and improving liquidity balances. Financial metrics are anticipated to remain solid over the next five years.
Good Planning Efforts: The system is highlighted by comprehensive long-range financial and capital planning.
High Debt But Affordable Rates: While debt levels on a per capita basis are above the category 'AA' rating medians and are expected to increase over the long term, rates are relatively low as a percentage of median household income (MHI), limiting the direct pressure on the rate base.
Solid Service Area: The service area, which is located outside of Houston, exhibits good growth patterns, very strong income metrics, and unemployment consistently lower than the state and U.S.
CREDIT PROFILE
ABOVE-AVERAGE FINANCIAL PROFILE
The system's historical financial performance has been strong, with net system revenues producing senior lien coverage of 3.4 times (x) or better from fiscal 2006-2009. Due to increasing debt service costs, senior lien coverage was a lower, although still solid 2.4x in fiscal 2010. Regular rate adjustments have maintained the system's above-average operating margins, helping to boost cash levels to a solid 319 days in fiscal 2010 from 239 days in fiscal 2006.
Fiscal 2011 estimates and pro forma projections presented by the city appear sound based on reasonable assumptions and indicate senior lien coverage levels will remain strong, ranging from 2.4x to 2.9x over the fiscal 2011 to 2016 forecast period.
With only 20% of the system capital improvement plan (CIP) anticipated to be funded from pay-as-you-go, liquidity levels are expected to remain at similar levels, if not improve, over the forecast period.
DESPITE INCREASES, RATES REMAIN VERY AFFORDABLE
Water and sewer rates are approved by the City Council as part of the budget process. Effective Jan. 1, 2012, the council approved a 12% increase to the combined monthly bill. At $68 per month (assuming average water and sewer usage of 11,000 and 7,000 gallons, respectively), combined charges are very affordable at 0.8% of MHI.
Because of the debt service cost increases anticipated from the current and proposed debt issuances, rate adjustments are planned for each of the next five years. In spite of planned annual increases to the combined monthly bill of 9% in fiscal 2013 and 3% in fiscal years 2014-2016, charges are expected to remain well below Fitch's affordability threshold of 2% of MHI.
WEAKENING DEBT PROFILE
The system's five-year CIP totals an estimated $40.6 million. Approximately, 80% of system needs are anticipated to be debt-funded. Needs focus primarily on rehabilitation and repair, offering some flexibility in terms of project prioritization.
System debt ratios on a per capita basis are high with outstanding debt per customer at approximately $840 and are forecast to increase above the category 'AA' rating medians in five years. Furthermore, debt amortization is slightly below-average with principal payout at 35% and 74% in 10 and 20 years, respectively.
SYSTEM AND SERVICE AREA
The system provides service to an estimated population of approximately 85,000 through 27,000 water and 25,000 wastewater connections. The majority of customers are residential and there are no customer concentration concerns.
Sugar Land is located approximately 20 miles southwest of downtown Houston in Fort Bend County. The expansion of US Highway 59, which is the direct route from Sugar Land to downtown Houston, along with other roadway improvements in and around the city, has spurred healthy commercial and residential development activity in recent years. The benefit is evidenced in building permit trends which point to steady residential building permit activity despite the national economic slowdown.
City wealth levels are 2.0x state and national averages, and the city's unemployment rate at 5.7% as of November 2011 is below the county (7%), state (7.5%) and national (8.2%) estimates for the month.
Water supplies are currently derived from the city's 17 wells. The city currently has a production capacity of 43 million gallons per day (MGD). The projected ultimate water demand for the city is approximately 24 MGD on average; thus, water supplies are more than sufficient to meet the city's projected build-out demand.
To meet Fort Bend Subsidence District regulations, the city approved a Groundwater Reduction Plan that outlines the city's strategies for meeting mandated conversion to non-groundwater sources. The city has commenced a surface water conversion project that involves the construction of transmission lines, groundwater plant improvements and construction of a 9 MGD surface water treatment plant (with capability for future expansion to 22 MGD) adjacent to Oyster Creek and Gannoway Lake.
The design of the surface water treatment plant was completed in January 2010. The total cost of the conversion project is an estimated $109.5 million, all of which has been entirely funded. Design costs have come in within budget and all construction contracts have been awarded. The estimated completion date for the conversion project is early 2013.
Wastewater treatment is provided by the Sugar Land Regional Sewerage System Plant and the South Wastewater Treatment Plant. Both plants are operated by the Brazos River Authority (BRA). The current contract with BRA began in October 2010 and is for three years with two one-year extensions. With a combined wastewater treatment capacity of 16 MGD and sewer flows averaging 8.1 MGD annually over the past five years, there is more than sufficient wastewater treatment capacity remaining to handle city growth.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Revenue-Supported Rating Criteria, this action was informed by information from CreditScope and the Municipal Advisory Council of Texas.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 20, 2011);
--'U.S. Water and Sewer Revenue Bond Rating Criteria' (Aug. 10, 2011);
--'2012 Water and Wastewater Medians' (Dec. 8, 2011);
--'2012 Outlook: Water and Sewer Sector' (Dec. 8, 2011).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
U.S. Water and Sewer Revenue Bond Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647331
2012 Water and Sewer Medians
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657111
2012 Outlook: Water and Sewer Sector
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657110
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 RatingsPrimary AnalystJulie G. Seebach, +1-512-215-3740DirectorFitch, Inc.111 Congress Avenue, Suite 2010Austin, TX 78701orSecondary AnalystTeri Wenck, CPA, +1-512-215-3742Associate DirectororCommittee ChairpersonMichael Rinaldi, +1-212-908-0833Senior DirectororMedia RelationsSandro Scenga, +1-212-908-0278sandro.scenga@fitchratings.com
Source: Fitch Ratings
NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns 'AAA' long-term ratings and 'F1+' short-term ratings to variable rate demand preferred shares (VRDP shares) issued by Nuveen New York Performance Plus Municipal Fund, Inc. (NNP), a municipal closed-end fund managed by Nuveen Fund Advisors, Inc. (NFA) and subadvised by Nuveen Asset Management, LLC (NAM):
--$89,000,000 of VRDP shares, series 1, mandatory redemption date of March 1, 2040, with a liquidation preference of $100,000 per share.
KEY RATING DRIVERS
The 'F1+' short-term rating primarily reflects:
--The credit strength of Deutsche Bank AG (rated 'A+/F1+' by Fitch), acting through its New York branch, as liquidity provider.
--The terms and conditions of the VRDP shares purchase agreement (purchase agreement).
The 'AAA' long-term rating primarily reflects:
--Sufficient asset coverage provided to the VRDP 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.
TENDER AND REMARKETING
The VRDP shares benefit from a demand feature giving investors the right to tender the securities with a seven-day notice for remarketing. The VRDP shares are also subject to a mandatory tender for remarketing upon the occurrence of certain events, such as non-payment of dividends by the fund, among others. VRDP shares that are unsuccessfully remarketed are purchased by the liquidity provider, Deutsche Bank AG, acting through its New York branch, pursuant to an unconditional demand feature.
The VRDP shares have a 30-year mandatory redemption date and pay an adjustable dividend rate set weekly by the remarketing agent, Morgan Stanley & Co. LLC (or any subsequent replacement). Should a remarketing be unsuccessful, the dividend rate will reset to a maximum rate as defined in the governing documents.
PURCHASE OBLIGATION
The VRDP shares are supported by a purchase agreement to ensure full and timely repayment of the liquidation preference amount plus any accumulated and unpaid dividends to holders upon occurrence of certain events. The agreement requires the liquidity provider to purchase all VRDP shares tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP shares if the fund has not obtained an alternate purchase agreement prior to the termination of the purchase agreement being replaced or following the downgrade of the liquidity provider's rating below 'F2' (or equivalent).
The purchase of VRDP shares pursuant to the purchase agreement is unconditional and irrevocable, and as such the short-term ratings assigned to the VRDP shares are directly linked to the short-term creditworthiness of the associated liquidity provider.
The liquidity provider's obligation under the purchase agreement is currently scheduled to terminate on March 30, 2012. Fitch expects the purchase agreement to be subsequently extended, with terms that are substantially similar to the current purchase agreement.
LEVERAGE
As of Dec. 30, 2011, the fund had managed assets of $356.5 million including leverage of $132.5 million. Leverage consisted of $89 million of VRDP shares and $43.5 million of floating rate certificates of tender option bonds.
ASSET COVERAGE
The fund's asset coverage ratio for the VRDP shares, as calculated in accordance with the Investment Company Act of 1940, was approximately 370%. This is in excess of the minimum asset coverage threshold of 225% currently set by the terms of the fee agreement between the fund and the liquidity provider (Minimum VRDP Asset Coverage Test).
The fund has also covenanted with the liquidity provider to maintain an Effective Leverage Ratio for both VRDP shares and floating-rate certificates of tender option bonds below 45% (or 46% if the increase in the ratio is due exclusively to asset market value volatility). The Effective Leverage Ratio is currently approximately 37%.
In the event of asset coverage declines, the fund's governing documents will require the fund to reduce leverage in order to restore compliance with the OC test(s) breaching the required
threshold(s).
STRESS TESTS
Fitch performed various stress tests on the fund to assess the strength of the structural protections available to the VRDP shares compared to the rating 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 its operating and investment guidelines.
Only under remote circumstances, such as increasing the fund's issuer concentration while simultaneously migrating the portfolio to 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds, did the asset coverage available to the VRDP Shares fall below the 'AAA' threshold, and instead passed at an 'AA' rating level.
Given the highly unlikely nature 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' rating.
THE FUND
The fund is a closed-end management investment company regulated by the Investment Company Act of 1940. The fund seeks to provide current income exempt from regular federal as well as New York State and New York City income tax and to enhance portfolio value. The fund currently invests primarily in investment grade quality municipal bonds.
NFA, a subsidiary of Nuveen Investments, is the fund's investment advisor, responsible for the fund's overall investment strategy and its implementation. NAM is a subsidiary of NFA and oversees the day-to-day operations of the fund. Nuveen Investments and its affiliates had approximately $207 billion of assets under management as of Oct. 31, 2011.
RATINGS SENSITIVITY
The ratings assigned to the VRDP 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 ratings to be lowered by Fitch.
Certain terms of the Minimum VRDP Shares Asset Coverage Test and Effective Leverage Ratio are set in the liquidity and fee agreements, which are renewed on a periodic basis. Changes to these terms that weaken the tests may have negative rating implications.
The short-term ratings assigned to the VRDP shares may also be sensitive to changes in the financial condition of the liquidity provider. A downgrade of the liquidity provider to 'F2' would result in a downgrade of the short-term ratings of the VRDP shares to 'F2,' absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating of the VRDPs, given the acceleration features in the transaction that would result in a mandatory tender of the VRDPs for purchase by the liquidity provider.
The fund has the ability to assume economic leverage through derivative transactions which may not be captured by the fund's Minimum VRDP 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 objective of achieving tax-exempt income. Material derivative exposures in the future could have potential negative rating implications if it adversely affects asset coverage available to rated VRDP shares.
For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by 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 ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess this rating were the public domain and Nuveen Fund Advisors.
To receive Fitch's forthcoming research on closed-end funds please go to:
http://forms.fitchratings.com/forms/FAMCEFOptinform
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);
--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 10, 2011);
--'2012 Outlook: Closed-End Fund Leverage' (Dec. 19, 2011);
--'Closed-End Funds: Derivatives Under Review' (Nov. 16, 2011);
--'Primer: CEF Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Global Rating Criteria for Asset-Backed Commercial Paper
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=655450
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840
Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654295
Closed-End Funds: Derivatives Under Review (Increased Use and Limited Transparency Are Key Considerations)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656591
2012 Outlook: Closed-End Fund Leverage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=660709
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 RatingsPrimary AnalystGreg FayvilevichAssociate Director+1-212-908-9151Fitch, Inc.One State Street PlazaNew York, NY 10004orSecondary AnalystRuss ThomasDirector+1-312-368-3189orCommittee ChairpersonViktoria Baklanova, CFASenior Director+1-212-908-9162orMedia Relations:Brian Bertsch, +1-212-908-0549 (New York)brian.bertsch@fitchratings.com
Source: Fitch Ratings
NEW YORK--(BUSINESS WIRE)-- Fitch Ratings believes that the Nuclear Regulatory Commission's (NRC) vote on February 9 approving the combined construction and operating license (COL) for Plant Vogtle Units 3 and 4 is a significant milestone in the development of new nuclear capacity in the US but has limited impact on credit. The new reactors are being developed by Southern Company subsidiary, Georgia Power Company (GPC) along with its partners the Municipal Electric Authority of Georgia (MEAG), Oglethorpe Power Corporation (OPC), and the city of Dalton, GA. More than 30 years have passed since the last COL was granted in the U.S.
For GPC, MEAG, and OPC, the project is a significant, long-term capital investment in baseload capacity. The two public power utilities have already prefunded, through debt issuance, a substantial portion of their share of the construction costs. GPC will rely on a combination of Department of Energy loan guarantees and traditional utility funding sources. The utility benefits from constructive rate treatment of project costs including recovery of construction work in progress on financing costs.
Passage of the COL was helped by the use of the Westinghouse AP 1000 design, which provides state of the art safety features. We continue to expect the approval of the COL for the VC Summer Units 2 and 3, in part because they also utilize this design. The new Summer units are being developed by South Carolina Electric & Gas Company and South Carolina Public Service Authority (Santee Cooper).
We believe that new COL applications beyond those in process are unlikely in the near term. Despite significant enthusiasm for nuclear power in recent years as an alternative to fossil generation, diminished load growth in the slow economy and historically low natural gas and wholesale electric prices have dampened interest. Combined with lower prospects for carbon emission regulations and evolving safety standards following the events at Fukushima, the industry's focus has shifted to maintenance of the nation's existing nuclear fleet.
Details of the approval are not yet available. Fitch will review them as soon as they are made available to us to evaluate the conditions included in the COL and any impact they may have on the cost or timing of completion.
Additional information is available on www.fitchratings.com
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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Fitch Ratings, New YorkRob Rowan, +1-212-908-9159Senior DirectorFitch WireFitch Ratings1 State StreetNew York, NYorBhala Mehendale, +1-212-908-0520DirectorU.S. Public PowerOne State StreetNew York, NYorMedia Relations:Sandro Scenga, +1-212-908-0278sandro.scenga@fitchratings.com
Source: Fitch Ratings
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