










Fitch Affirms TS&W/Claymore Tax-Advantaged Balanced Fund Preferred Share at 'AAA'


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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' rating assigned to the following preferred shares issued by TS&W/Claymore Tax-Advantaged Balanced Fund (NYSE: TYW), a leveraged municipal/equity closed-end fund co-advised by Guggenheim Funds Investment Advisors, LLC (Guggenheim Funds), Thompson, Siegel & Walmsley LLC (TS&W) and SMC Fixed Income Management, LP (SMC):
--$52,500,000 of auction market preferred shares (AMPS), series M7, with a liquidation preference of $25,000 per share;
--$52,500,000 of auction market preferred shares (AMPS), series T28, with a liquidation preference of $25,000 per share.
The main drivers of the rating affirmation are sufficient asset coverage, 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 Guggenheim Funds, TS&W and SMC as investment advisors. Fitch's rating on the AMPS speaks only to the credit risk of the security and not to potential liquidity in the secondary market.
As of Jan. 14, 2011, the fund's total assets were approximately $281 million. The fund's total leverage was approximately $105 million or 37% of total assets, consisting entirely of rated AMPS. No derivatives were utilized in the portfolio as of the same date.
At the time of the rating affirmation, the fund's asset coverage ratio for preferred stock, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), was in excess of 200%, which is the minimum asset coverage required by the 1940 Act. Also, at the time of the affirmation, the fund's asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization tests per the 'AAA' rating guidelines outlined in Fitch's applicable criteria were in excess of 100%, which are the minimum asset coverage amounts deemed consistent with an 'AAA' rating.
Should the asset coverage tests of the AMPS decline below their minimum threshold amounts (as tested on each business day) and are not cured within the pre-specified timeframe of seven business days, the governing documents require the fund to reduce the leverage in a sufficient amount to restore compliance with the applicable asset coverage tests within 53 calendar days.
TS&W/Claymore Tax-Advantage Balanced Fund is a closed-end management investment company, registered under the Investment Company Act of 1940, as amended, that commenced investment operations in April 2004. The fund's investment objective is to provide a high level of total after-tax return, including attractive tax advantaged income. The fund seeks to invest in a portfolio of assets consisting primarily of municipal securities, the interest on which is exempt from regular Federal income tax and common stocks and preferred securities that are eligible to pay dividends, which for individual investors qualify for the long term capital gains rate.
As of Dec. 31, 2010, municipal securities constituted approximately 55% of the portfolio. The municipal portion of the portfolio included exposure to the health care (10%), water & sewer (9%) and general obligations (8%) municipal sectors with no sector above 25%, consistent with Fitch's applicable criteria. The top states represented in the municipal portion of the fund were New York (12%), Michigan (9%), California (5%) and New Jersey (5%). Approximately 30% of the portfolio was invested in equity securities consisting primarily of large-cap dividend-paying stocks, and approximately 11% was invested in other taxable corporate fixed income securities. The remaining 4% consisted of preferred stock investments. From time to time, assets are rebalanced to maintain at least 50% of the fund's total assets in municipal securities.
On Sept. 27, 2010, Claymore Securities, Inc. (Claymore), parent company to the fund's existing investment adviser, Claymore Advisors LLC, announced that it had changed its name to Guggenheim Funds Distributors, Inc. The change was part of the business integration following the acquisition of Claymore by Guggenheim Partners announced on Oct. 15, 2009. As a result of this announcement, Claymore Advisors LLC was re-named as Guggenheim Funds Investment Advisors, LLC. Guggenheim Funds Distributors and Guggenheim Funds Investment Advisers , LLC are both affiliates of Guggenheim Partners, LLC, a diversified financial services firm with more than 500 employees and over $100 billion of assets under supervision.
Thompson, Siegel & Walmsley (TS&W) serves as Investment Sub-Adviser to the Fund and is responsible for the day-to-day management of the equity and income securities portion of the Fund. TS&W was founded in 1969 and as of Dec. 21, 2010 the firm has $7.4 billion in assets under management.
SMC Fixed Income Management, LP, the Fund's investment manager, is responsible for the day-to-day management of the municipal securities portion of the Fund. SMC Fixed Income Management was founded in 2006.
The rating may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating 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.
Additional information is available at '[ www.fitchratings.com ]'.
The sources of information used to assess these ratings were the public domain, and Tortoise Capital Advisors.
Applicable Criteria and Related Research:
--'Closed-End Fund Debt and Preferred Stock Rating Criteria', Aug. 17, 2009;
--'Closed-end Funds: Fitch Clarifies Criteria for Make-Whole Amounts and Other Prepayment Obligations', March 18, 2010.
Applicable Criteria and Related Research:
Closed-End Fund Debt and Preferred Stock Rating Criteria
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462492 ]
Closed-End Funds: Fitch Clarifies Criteria for Make-Whole Amounts and Other Prepayment Obligations
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=504986 ]
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