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Fitch Rates Sr Notes and Prfd Shares Issued by Blackstone/GSO Sr Floating Rate Term Fund 'AAA'

^{Published on 2010-08-13 15:11:03 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has assigned 'AAA' ratings to the following securities issued by Blackstone/GSO Senior Floating Rate Term Fund (NYSE: BSL), a senior loan closed-end fund managed by GSO/Blackstone Debt Funds Management LLC:

--$96,000,000 series A floating rate senior secured notes due 2020;

--$48,000,000 series A floating rate cumulative term preferred shares.

The closing date for the Senior Notes and Preferred Shares was Aug. 13, 2010. The fund will use the net proceeds from the sale of the Senior Notes and Preferred Shares for fund investments and general corporate purposes. As of the closing date, the fund's pro forma leverage, consisting of the Senior Notes and the Preferred Shares, was $144 million, or approximately 33% of total assets.

The 'AAA' ratings are based on asset coverage provided to the Senior Notes and the Preferred Shares by the fund's underlying portfolio of assets consistent with Fitch criteria, 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 and the capabilities of GSO/Blackstone Debt Funds Management LLC as investment advisor.

The fund employs various overcollateralization tests which Fitch views as consistent with its criteria for debt obligations of closed-end funds. Specifically, the fund's governing documents include asset coverage tests which measure the sufficiency of the market value and the discounted market value of fund assets relative to fund liabilities. As of Aug. 13, 2010, all of the fund's pro forma asset coverage ratios for the Senior Notes and the Preferred Shares were in excess of their minimum required amounts.

Should any of the fund's asset coverage tests decline below their minimum threshold amounts, the governing documents' mandatory redemption provisions will require the fund to delever the affected liabilities in a sufficient amount to restore compliance with the applicable asset coverage test(s). Fitch notes that investors may potentially have the right to waive such mandatory redemption provisions, which could put negative pressure on the ratings.

Fitch views the fund's permitted investments, diversification framework and mandatory deleveraging mechanisms (as set forth in the fund's governing documents) as consistent with an 'AAA' rating.

Blackstone/GSO Senior Floating Rate Term Fund is a non-diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended. Commencing investment operations on May 28, 2010, the fund's primary investment objective is to seek high current income, with a secondary objective to seek preservation of capital. The fund will invest at least 80% of its assets in senior secured floating rate loans, and may invest up to 20% of its assets in other loans and securities, including in USD-denominated European Union and Canadian loans.

GSO/Blackstone Debt Funds Management LLC is the fund's investment advisor, responsible for the fund's overall investment strategy and its implementation. GSO/Blackstone Debt Funds Management LLC is a wholly owned subsidiary of GSO Capital Partners LP, which is the credit platform of The Blackstone Group L.P. (rated 'A+/F1' by Fitch). The Blackstone Group L.P. is a leading manager of private capital and provider of financial advisory services, with assets under management of $111 billion as of June 30, 2010.

Applicable criteria available on Fitch's web site at '[ www.fitchratings.com ]' include:

--'Closed-End Fund Debt and Preferred Stock Rating Criteria' (Aug. 17, 2009).

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

Related Research:

Closed-End Fund Debt and Preferred Stock Rating Criteria

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462492 ]

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