Fitch Expects to Rate Preferred Shares Issued by Nuveen Closed-End Fund

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign an 'AA' long-term rating to the following Term Preferred Shares of Nuveen Short Duration Credit Opportunities Fund (the Fund). The Fund is managed by Nuveen Fund Advisors, LLC (NFA) and subadvised by Symphony Asset Management, LLC (Symphony).

Fitch assigns the following rating:

Nuveen Short Duration Credit Opportunities Fund:

--$35 million of Series 2020 Term Preferred Shares, rated 'AA (EXP)'.

The Term Preferred Share issuance is expected to close in mid-November, 2015. The Fund is expected to use the proceeds of the Term Preferred Share issuance to purchase assets and partially refinance its outstanding credit facility with State Street Bank.

KEY RATING DRIVERS

The 'AA (EXP)' long-term rating primarily reflects:

--Sufficient asset coverage provided to the Term Preferred Shares as calculated per the Fund's asset coverage test;

--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;

--The capabilities of NFA as investment advisor and Symphony as subadvisor.

FUND PROFILE

The Fund's investment objective is to provide current income and the potential for capital appreciation. Under normal market circumstances, the Fund invests at least 70% of its managed assets in adjustable rate corporate debt instruments, including senior secured loans, second lien loans and other adjustable rate corporate debt instruments. Up to 30% of the Fund's managed assets may include investments in high yield debt and other debt instruments.

Up to 20% of the Fund's managed assets can consist of tactical short positions, consisting primarily of high yield debt, either directly or through use of derivatives. Fitch expects the fund will execute its tactical short positions primarily through the purchase of credit default swap (CDS) protection. The Fund's guidelines also permit the short sale of borrowed securities to finance asset purchases. In addition, the Fund may invest up to 20% assets in debt instruments of non-U.S. issuers that are U.S. dollar or non-U.S. dollar denominated, including issuers located, or conducting their business, in emerging market countries.

At the present time, the notional value of the Fund's CDS protection contracts purchased is less than 3% of portfolio assets, the Fund has no assets financed by the short sale of borrowed securities and about 14% of assets are debt instruments of non-U.S. issuers.

Under normal market circumstances, the Fund will maintain a portfolio with an average duration that does not exceed two years. Total assets as of Aug. 31, 2015 were $270 million. The Term Preferred Share issuance is expected to increase total assets to approximately $290 million.

FUND LEVERAGE

As of Aug. 31, 2015, the Fund's total leverage consisted of approximately $85.2 million outstanding under a credit facility. The Fund intends to use the proceeds of the Term Preferred Share issuance to purchase assets and reduce the amount outstanding under this facility to approximately $70.5 million. The Term Preferred Share issuance is expected to increase the effective leverage ratio to approximately 37%. Between Aug. 31, 2014 and Aug. 31, 2015, leverage ranged between 30.5% and 32%.

ASSET COVERAGE

After the expected mid-November 2015 closing of the Term Preferred Share issuance, the Fund's asset coverage ratio for total outstanding preferred shares, as calculated in accordance with the Investment Company Act of 1940, is expected to remain in excess of the minimum asset coverage of 225% required by the governing documents of the Term Preferred Shares.

STRUCTURAL PROTECTIONS

Compliance with the asset coverage test threshold is tested daily. Failure to have asset coverage of 225% after the close of business on the asset coverage cure date requires the Fund to redeem sufficient Term Preferred Shares, reduce the amount outstanding under the bank line, and/or make corrective trades to restore compliance. The total market value exposure period (i.e. the pre-specified time period allotted for valuation, cure and redemption in the event of a breach) for the asset coverage test is within the 60 business day guideline noted in Fitch's criteria.

Unlike all other Nuveen preferred shares rated by Fitch to date, the governing documents of the Term Preferred Shares do not provide for an effective leverage ratio test. The documents require asset coverage of 225%, which effectively caps structural leverage at 44.4% (1/2.25). The asset coverage test does not cover economic leverage caused by short sales or unhedged derivative exposures. However, based on discussion with management, Fitch does not expect material amounts of this activity to take place over the life of the Term Preferred Shares.

STRESS TESTS

Fitch performed various stress tests to assess the strength of the structural protections available to the Term Preferred 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 severe credit deterioration or increased issuer concentration did the asset coverage available to the Term Preferred Shares fall below the 'AA' threshold, and instead passed at the 'A' rating level.

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

THE ADVISORS

NFA, a subsidiary of Nuveen Investments, is the Fund's investment advisor, responsible for the Fund's overall investment strategy and its implementation. Symphony is an affiliate of NFA and oversees the day-to-day investment operations of the Fund. Nuveen Investments and its affiliates had approximately $223 billion of assets under management as of Sept. 30, 2015.

RATING SENSITIVITIES

The rating assigned to the Term Preferred 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 Term Preferred Share's asset coverage test. The Fund also has the ability to assume leverage by borrowing securities to fund a short sale. Outside of the above noted CDS protection purchased, the Fund does not engage in speculative derivative activities or short sales of borrowed securities to fund asset purchases and Fitch's analysis assumes the Fund does not envision engaging in material amounts of such activity in the future. Any material derivative exposures or short sales of borrowed assets could have potential negative rating implications if they adversely affect asset coverage available to rated preferred securities.

For additional information about Fitch's rating guidelines applicable to debt and preferred stock issued by closed-end funds, 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, NYLIM and MacKay Shields

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

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

Applicable Criteria

Rating Closed-End Fund Debt and Preferred Stock (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871119

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993319

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993319

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151102006648/en/

Fitch Ratings
Primary Analyst
Ralph Aurora
Senior Director
+1-212-908-0528
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Russ Thomas
Senior Director
+1-312-368-3189
or
Committee Chairperson
Davie Rodriguez, CFA
Senior Director
+1-212-908-0386
or
Media Relations:
Hannah James, + 1-646-582-4947
[email protected]

Source: Fitch Ratings

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