Fitch: MLP CEFs Utilize Private Placements Despite Commodity Price Pressures

NEW YORK--(BUSINESS WIRE)-- MLP closed-end funds (CEFs) continue to access the private placement market to raise capital and refinance existing debt despite recent price and NAV pressures, and declines in the energy sector, according to Fitch Ratings.

On average, MLP CEFs have experienced a 24.75% loss based on NAV since Nov. 1, 2014. During the same period, they have experienced a 28.5% loss on a price total return basis, and as a result average discounts of have widened from -4.35% on Nov. 1, 2014 to -10.43%.

In that same period, MLP CEFs have issued $687 million of privately placed notes and preferred shares. This accounts for more than 93% of total CEF private placement issuance.

Three MLP fund managers have dominated the space, including Kanye Anderson, Tortoise Capital and ClearBridge.

New issuance has also allowed funds to take advantage of the low interest rate environment to lock in financing costs. Private placement issuance among MLP CEFs has mirrored the broader market with more than 98% having a final maturity of 2020 or beyond. More than 90% of issuance had a fixed coupon structure.

MLP CEFs have historically played a large role in the private placement market as the size of their portfolios affords them the ability to pay a higher cost for leverage relative to other taxable funds like loan funds or investment grade corporate bond funds.

To date, ratings remain stable. Fitch believes MLP CEFs are well positioned going forward to manage their leverage and deploy capital at attractive levels, and private placement issuance will continue to play an important role in allowing managers to raise capital as commodity prices remain low.

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

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Fitch Ratings
Ian Rasmussen
Senior Director
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or
Brian Knudsen
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Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: [email protected]

Source: Fitch Ratings

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