Fitch Rates Two ClearBridge MLP Closed-end Funds' Notes 'AAA'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'AAA' ratings to the following series of senior secured notes (Notes) issued by ClearBridge Energy MLP Opportunity Fund Inc.(NYSE: EMO) and ClearBridge Energy MLP Total Return Fund Inc.(NYSE: CTR) closed-end funds advised by Legg Mason Partners Fund Advisor, LLC (LMPFA) and sub-advised by ClearBridge Investments, LLC (ClearBridge).

EMO

--Series D senior secured notes due Aug. 26, 2022, up to $20,000,000, rated 'AAA';

--Series E senior secured notes due Aug. 26, 2026, up to $5,000,000, rated 'AAA'.

CTR

--Series D senior secured notes due Aug. 26, 2022, up to $10,000,000, rated 'AAA';

--Series E senior secured notes due Aug. 26, 2024, up to $10,000,000, rated 'AAA';

--Series F senior secured notes due Aug. 26, 2026, up to $15,000,000, rated 'AAA'.

On July 31, 2015, Fitch affirmed the 'AAA' ratings assigned to other series of notes of EMO and CTR, which are pari passu to these new series. The issuance will be used to pay down the funds' credit facility borrowings.

KEY RATING DRIVERS

The ratings reflect:

--Sufficient pro forma asset coverage provided to the Notes as calculated per the funds' asset coverage tests;

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

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

--The capabilities of ClearBridge as investment advisor.

FUNDS PROFILE

CTR and EMO are non-diversified, closed-end management investment companies sharing a similar investment goal of obtaining a high level of total return with an emphasis on cash distributions. The funds invest the majority of their portfolios in equity securities of publicly-traded Master Limited Partnerships (MLPs) and their affiliates in the energy infrastructure sector. These companies gather, transport, process, store, distribute or market natural gas, natural gas liquids, coal, crude oil, refined petroleum products or other natural resources, or explore, develop, manage or produce such commodities.

FUNDS LEVERAGE

As of Feb. 28, CTR total assets were $1.250 billion supporting $180 million of Fitch-rated notes, $115 million of bank borrowing (pari passu to the notes) and $70 million of Fitch-rated MRPS.

As of the same date, EMO total assets were $1.110 billion supporting $150 million of Fitch-rated Notes, $100 million of bank borrowing (pari passu to the Notes) and $70 million of Fitch-rated MRPS.

ASSET COVERAGE

The funds' pro forma asset coverage ratios for the Notes, as calculated in accordance with the Fitch overcollateralization (OC) tests per the 'AAA' rating guidelines outlined in Fitch's closed-end fund criteria, were in excess of 100%. This is the minimum asset coverage guideline required by the funds' governing documents.

The funds' pro forma asset coverage ratios for all outstanding Notes and MRPS, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), were in excess of 225%, which is the minimum asset coverage required by the funds' governing documents.

STRUCTURAL PROTECTIONS

Should the asset coverage tests decline below their minimum threshold amounts (as tested on the last business day of each week), under the terms of the Notes the funds are required to deliver notice to the note purchasers within five business days. The fund manager is then expected to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC Tests breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC Tests and the 1940 Act test breaches) within a pre-specified time period (a maximum of 47 calendar days for the Fitch OC Tests and a longer period for the 1940 Act test).

Failure to cure an asset coverage breach as described above is an event of default under the terms of the Notes. The fund must then deliver a notice within five business days to the note purchasers and a majority vote of note purchasers may then declare all the Notes then outstanding to be immediately due and payable.

The funds are also prohibited from paying out a common stock dividend if it fails to cure a breach to the Notes' 300% 1940 Act asset coverage test. Fitch views this as an added incentive to cure and deleverage in a timely manner, regardless of acceleration by the Notes purchasers.

THE ADVISOR

LMPFA and ClearBridge are wholly owned subsidiaries of Legg Mason, Inc., a global asset management firm with $699 billion in assets under management as of June 30, 2015. ClearBridge is Legg Mason, Inc.'s largest equity manager.

RATING SENSITIVITIES

The ratings are based on the terms of the Notes stipulating mandatory minimum overcollateralization and de-leveraging provisions in the event of asset coverage declines. Fail to cure an asset coverage breach may lengthen exposure to market value risk and cause the ratings to be lowered by Fitch.

The ratings may also be sensitive to material changes in the market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.

For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.

To receive complimentary closed-end fund research, opt-in at the following link: http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/

Additional information is available at www.fitchratings.com.

Date of Relevant Committee: March 16, 2015.

The sources of information used to assess this rating were the public domain, LMPFA and ClearBridge.

Applicable Criteria

Rating Closed-End Fund Debt and Preferred Stock (pub. 04 Sep 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=765528

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990040

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/20150827006047/en/

Fitch Ratings
Primary Analyst
Ian Rasmussen
Senior Director
+1-212-908-0232
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ralph Aurora
+1-212-908-0528
or
Committee Chairperson
Davie Rodriguez, CFA
Senior Director
+1-212-908-0386
or
Media Relations
Alyssa Castelli, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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