Fitch Rates Preferred Shares of Nuveen Closed-End Fund

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned the following ratings to the Variable Rate Demand Preferred Shares (VRDP Shares) issued by Nuveen Enhanced AMT-Free Municipal Credit Opportunities Fund (NVG):

--$340,500,000 of VRDP Shares, Series 5, final mandatory redemption on Dec. 1, 2040, rated 'AAA/F1'. The liquidity provider is Societe Generale ('A/F1');

--$326,700,000 of VRDP Shares, Series 6, final mandatory redemption on Dec. 1, 2040, rated 'AAA/F1'. The liquidity provider is Sumitomo Mitsui Banking Corporation ('A/F1').

The new VRDP Shares are being issued in exchange for all of the fund's Series 3 VRDP Shares which are now marked as paid in full.

In addition, the long- and short-term ratings of all other preferred shares issued by NVG are affirmed as follows:

--$179,000,000 of VRDP Shares, Series 1, final mandatory redemption on Dec. 1, 2043, at 'AAA';

--$385,400,000 of VRDP Shares, Series 2, final mandatory redemption on Dec. 1, 2040, at 'AAA/F1+'. The liquidity provider is JPMorgan Chase Bank, N.A. ('AA-/F1+');

--$180,000,000 of VRDP Shares, Series 4, final mandatory redemption on June 1, 2046, at 'AAA';

--$240,400,000 of VMTP Shares, Series 2018, term redemption on Dec. 1, 2018, at 'AAA'.

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

KEY RATING DRIVERS

The short-term ratings of the VRDP Shares primarily reflect:

--The credit strength of the VRDP Shares' liquidity providers noted above;

--The terms and conditions of the VRDP Shares purchase agreements.

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

--Sufficient asset coverage provided to the preferred shares as calculated per each 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 each fund's operations;

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

FUND PROFILE

NVG is a closed-end management investment company regulated by the Investment Company Act of 1940 (the Act). NVG invests primarily in municipal securities that are exempt from the federal alternative minimum tax (AMT) as well as regular federal income tax.

Prior to a reorganization, as described in Fitch's press release dated April 11, 2016, NVG invested up to 20% of assets in below investment grade and / or unrated securities. Subsequent to the reorganization, NVG's investment mandate was expanded to permit the fund to invest up to 55% of assets in municipal securities rated 'BBB' or below, including below investment grade securities or unrated securities of comparable quality. Fitch expects the repositioning of the fund's portfolio to take place over time. As of Sept. 30, 2016, NVG's total investment exposure (i.e. total assets under management including assets purchased using leverage) was about $5.5 billion.

FUND LEVERAGE

NVG's total leverage on Sept. 30, 2016 consisted of about $1.7 billion of preferred shares and about $385 million of tender option bonds and the fund's effective leverage ratio was approximately 37%.

ASSET COVERAGE

As of today's date including the impact of the new issuance, the fund's asset coverage ratio, as calculated in accordance with the Act, is in excess of the minimum asset coverage threshold of 225% required by the fund's governing documents.

As of today's date including the impact of the new issuance, the fund's effective leverage ratio is below the 45% maximum effective leverage ratio allowed by the governing documents of the preferred shares issued by the fund.

SPECIAL RATE PERIOD

The Series 1 VRDP Shares and the Series 4 VRDP Shares are both subject to a Special Rate Period (SRP) scheduled to conclude June 19, 2019 in the case of the Series 1 VRDP Shares and June 19, 2019 for the Series 4 VRDP Shares. During the respective SRPs, the applicable VRDP shares will not be remarketed pursuant to optional or mandatory tender events and are not supported by a liquidity provider.

At the conclusion of the respective SRPs for the Series 1 and Series 4 VRDP Shares, the fund may mutually elect to extend these Special Rate Periods with the holders of the Series 1 or Series 4 VRDP Shares or enter into a new Special Rate Period with those holders or different qualified parties. Alternatively, the fund at that time may seek to appoint a liquidity provider and a remarketing agent for either Series of VRDP Shares and designate the subsequent rate period and following rate periods as minimum rate periods, in which the applicable VRDP Shares will be remarketable securities, available for purchase by qualified third party investors.

FUTURE REMARKETINGS FOR NVG VRDPs

If the rate periods subsequent to the SRP for the Series 1 and/or Series 4 VRDP Shares are designated as minimum rate periods, NVG will appoint a liquidity provider and a remarketing agent for the applicable Series of VRDP Shares. In this event, the applicable Series would be expected to benefit from an unconditional and irrevocable purchase obligation (see VRDP PURCHASE OBLIGATION below) similar to other Fitch-rated VRDP Shares issued by Nuveen closed-end funds. Under these circumstances, Fitch would expect to assign a short-term rating to the applicable Series of VRDP Shares based on the short-term rating of the liquidity provider(s) designated at that time.

PREFERRED SHARE STRUCTURAL PROTECTIONS

In the event of asset coverage declines, the fund's governing documents require the fund to reduce leverage in order to restore compliance with the applicable asset coverage test.

Minimum Asset Coverage compliance is tested daily for the VMTP Shares and monthly for the VRDP Shares. Compliance with the Effective Leverage Ratio is tested daily for all preferred shares.

For VRDP and VMTP Shares, failure to cure a breach of the Minimum Asset Coverage requirement by the allotted cure date results in mandatory redemption of sufficient preferred shares to restore compliance. To facilitate redemption, the fund will deposit sufficient funds with a third-party tender/redemption and paying agent. The time allowed for the fund to restore compliance is consistent with Fitch's 40 to 60 business day criteria guideline.

Under the terms of the VMTP Shares and the VRDP Shares that are in a SRP, a breach of the Effective Leverage Ratio threshold requires the fund to redeem a sufficient number of preferred shares, and/or reduce the amount of TOBs the fund has outstanding in order to restore compliance. The time allowed for the fund to restore compliance is consistent with Fitch's 40 to 60 business day criteria guideline.

The governing documents for the Series 2, Series 5, and Series 6 VRDP Shares, which are not under SRP, do not require mandatory deleveraging in the event of a breach of the Effective Leverage Ratio. Rather, the documents state that a breach of the Effective Leverage Ratio is a breach of the fee agreement with the applicable liquidity provider and at the option of the applicable liquidity provider, may result in mandatory tender of VRDP Shares of the applicable series for remarketing (see the VRDP Purchase Obligation section below for additional details). However, for as long as either the VMTP Shares are outstanding or a series of VRDP Shares is in an SRP, the fund will be required to restore compliance either through the redemption of preferred shares or a reduction in the amount of TOBs outstanding.

VRDP PURCHASE OBLIGATION

The short-term ratings assigned to the VRDP Shares of each applicable series are directly linked to the short-term creditworthiness of the associated liquidity provider. The VRDP Shares of the applicable series are supported by a purchase agreement to ensure full and timely repayment of all tendered VRDP Shares of such series plus any accumulated and unpaid dividends. The purchase agreement is unconditional and irrevocable.

The VRDP purchase agreement requires the liquidity provider to purchase all VRDP Shares of the applicable series tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP Shares of the applicable series 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 liquidity provider's role under the fee agreement relating to the purchase obligation for each applicable series has a scheduled termination date. Prior to the scheduled termination date, the fee agreement can be extended to a new scheduled termination date, or a new liquidity provider may be selected. Any future changes to the terms of the fee agreement that weakens the structural protections discussed above may have negative rating implications.

STRESS TESTS

Fitch performed various stress tests on NVG to assess the strength of the structural protections available to the preferred 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 funds' leverage and portfolio composition migrated to the outer limits of the funds' post-reorganization operating and investment guidelines.

Asset coverage available to the preferred shares fell below the 'AAA' threshold, and instead passed at the 'AA' rating level only under remote circumstances, such as increasing the fund's leverage to 45% as well as increasing issuer concentration while simultaneously migrating the portfolio to a level of 55% high yield bonds, the highest allowable under the fund's post-reorganization expanded investment mandate.

Given the highly unlikely nature of the stress scenarios, and the minimal rating impact at the target leverage level, Fitch views the permitted investments, municipal issuer diversification framework, and mandatory deleveraging mechanisms of NVG as consistent with the 'AAA' ratings assigned to the preferred shares.

THE ADVISORS

The investment advisor for NVG is NFA, a subsidiary of Nuveen Investments. NFA is responsible for the fund's overall investment strategies and their implementation. The subadvisor, NAM, is a subsidiary of NFA that oversees the day-to-day operations of the fund. Nuveen Investments and its affiliates had approximately $244.7 billion of assets under management as of Sept. 30, 2016.

RATING SENSITIVITIES

The ratings assigned to the preferred shares may be sensitive to material changes in the leverage level or 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.

For the VRDP Shares not under SRP, certain terms relevant to key VRDP structural protections, including asset coverage and effective leverage are set forth in the fee agreements relating to the purchase agreements and are renewed on a periodic basis. Any future changes to terms that weaken the structural protections may have negative rating implications. For the VRDP Shares under SRP, terms relevant to structural protections, including asset coverage and effective leverage are set forth in the Notice of SRP, which may be extended in the future. Any future changes to terms that weaken the structural protections 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 VRDP Shares, given the features in the transactions that would result in a mandatory tender of the VRDP shares for remarketing, or purchase by the liquidity provider in the event of a failed remarketing.

The fund has the ability to assume economic leverage through derivative transactions which may not be captured by the minimum asset coverage test or effective leverage ratio. The fund does not currently engage in speculative derivative activity and do 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 their investment objective of achieving tax-exempt income. Material derivative exposures in the future could have potential negative rating implications if they adversely affect asset coverage available to rated preferred shares.

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 at on 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/

Additional information is available at www.fitchratings.com

Applicable Criteria

Rating Closed-End Funds and Market Value Structures (pub. 09 Sep 2016)

https://www.fitchratings.com/site/re/886753

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1014637

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1014637

Endorsement Policy

https://www.fitchratings.com/regulatory

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT 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.

Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.

For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

View source version on businesswire.com: http://www.businesswire.com/news/home/20161110006481/en/

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
Brian Knudsen, +1-646-582-4904
Associate Director
or
Committee Chairperson
Davie Rodriguez, CFA, +1-212-908-0386
Senior Director
or
Media Relations, New York
Hannah James, +1-646-582-4947
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• New Green Hemp, Inc. (OTC: NGHI) Announces Strategic Vision Following EcoGreen Biotech Acquisition
• Lunai Bioworks (Nasdaq: LNAI) Names 10 Defendants in Naked Short Selling Fraud Suit
• University of Miami Health System's Commitment to Exceptional Patient Care Fuels Historic Rise in U.S. News Rankings