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Fitch Affirms Pfd Stock 'AAA' Ratings of Two Federated Closed-End Funds

^{Published on 2010-10-08 11:21:04 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' ratings assigned to auction market preferred shares (AMPS) issued by the following two leveraged U.S. closed-end funds managed by Federated Investment Management Company (Federated):

Federated Premier Intermediate Municipal Income Fund (NYSE: FPT)

--$41,900,000 of series A AMPS with a liquidation preference of $25,000 per share, affirmed at 'AAA'.

Federated Premier Municipal Income Fund (NYSE: FMN)

--$36,575,000 of series A AMPS with a liquidation preference of $25,000 per share, affirmed at 'AAA'.

The main drivers for the 'AAA' rating affirmations are sufficient asset coverage provided to the AMPS by the funds' underlying portfolios of assets, structural protections afforded by mandatory de-leveraging/cure provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the funds' operations and the capabilities of Federated as the funds' investment manager. The affirmations reflect the recent amendments to the funds' statement of preferences, which include updated asset coverage guidelines and legal collateral maintenance provisions consistent with an 'AAA' rating per Fitch's updated closed-end fund rating criteria.

As of Aug. 31, 2010, FPT's total assets were approximately $161 million and total leverage was approximately $61 million or 38% of total assets, consisting of $42 million in rated AMPS and $19 million in trust certificates of primary market tender option bonds. As of the same date, FMN's total assets were approximately $143 million and total leverage was approximately $54 million or 38% of total assets, consisting of $37 million in rated AMPS and $17 million in trust certificates of primary market tender option bonds.

As of Aug. 31, 2010, the funds' asset coverage ratios for total outstanding AMPS and trust certificates of tender options bonds, as calculated per Fitch's updated criteria were in excess of 100% for an 'AAA' rating level, which is a minimum asset coverage required by the funds' amended and restated statement of preferences. As of the same date, the funds' asset coverage ratios for total outstanding AMPS, as calculated in accordance with the Investment Company Act of 1940, were in excess of 200%, which is also a minimum asset coverage required by the funds' governing documents. Should either of the asset coverage tests decline below their minimum threshold amounts and not be cured within the pre-specified timeframe, the governing documents require the fund to deleverage or otherwise cure the violation through portfolio adjustment in a sufficient amount to restore compliance with the applicable asset coverage test(s).

Federated Investment Management Company serves as the funds' investment advisor. Federated Investment Management Company is a direct wholly-owned subsidiary of Federated Investors, Inc. As of June 30, 2010, Federated Investors, Inc. had approximately $337 billion in assets under management.

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

The sources of information used to assess these ratings were Federated Investment Management Company, State Street Fund Services and the public domain.

Applicable Criteria and Related Research:

--'Closed-End Funds: Evolving Use of Leverage and Derivatives' (Sep. 27, 2010);

--'Closed-End Funds: Redemptions Provide Some Liquidity to Illiquid ARPS Market' (Aug 30. 2010);

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

Applicable Criteria and Related Research:

Closed-End Funds: Evolving Use of Leverage and Derivatives

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=559525 ]

Closed-End Funds: Redemptions Provide Some Liquidity to Illiquid ARPS Market

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=552106 ]

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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