Business & Finance
Business and Finance
Business and Finance
Tue, March 8, 2011
Mon, March 7, 2011 Fitch Rates Senior Securities Issued by Kayne Anderson Midstream/Energy Fund 'AAA' and 'AA'
NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has assigned the following ratings to senior securities issued by Kayne Anderson Midstream/Energy Fund, Inc. (NYSE: KMF), a closed-end, non-diversified investment management company advised by KA Fund Advisors, LLC:
--$55,000,000 3.93% Series A senior unsecured notes due March 3, 2016 - rated 'AAA';
--$60,000,000 4.62% Series B senior unsecured notes due March 3, 2018 - rated 'AAA';
--$35,000,000 5.32% Series A mandatory redeemable preferred shares (MRPS) due March 3, 2018 - rated 'AA'.
The main drivers for the assigned ratings are sufficient asset coverage relative to Fitch's published 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 KA Fund Advisors, LLC as investment advisor. As of Jan. 31, 2011, the fund's total assets were approximately $564 million.
At the time of the issuance of the series A and B notes, the fund's pro forma asset coverage ratio, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), was in excess of 300%, which is the minimum asset coverage required by the 1940 Act. Also, at the time of issuance, the fund's pro forma asset coverage ratio, as calculated in accordance with the Fitch overcollateralization (OC) test per the 'AAA' rating guidelines outlined in Fitch's 'Closed-End Fund Debt and Preferred Stock Rating Criteria' was in excess of 100%, which is the minimum asset coverage deemed consistent with Fitch's 'AAA' criteria.
In addition, the fund's asset coverage ratio for series A MRPS, as calculated in accordance with the Investment Company Act of 1940, was in excess of 200%, which is the minimum asset coverage level required by the 1940 Act with respect to preferred stock. The fund's pro forma asset coverage ratio, as calculated in accordance with the Fitch OC test per the 'AA' rating guidelines outlined in Fitch's applicable criteria was in excess of 100%, which is the minimum asset coverage deemed consistent with Fitch's 'AA' criteria.
Kayne Anderson Midstream/Energy Fund, Inc. is a newly organized non-diversified, closed-end fund, which commenced its operations on Nov. 24, 2010. The fund's investment objective is to provide a high level of total return with an emphasis on making quarterly cash distributions to its common stockholders. The fund seek to achieve that investment objective by investing at least 80% of its total assets in the securities of companies in the Midstream/Energy Sector, consisting of midstream master limited partnerships (MLPs), midstream companies, other MLPs and other energy companies.
KA Fund Advisors, LLC is the fund's investment adviser, responsible for implementing and administering the fund's investment strategy. It is a subsidiary of Kayne Anderson Capital Advisors, L.P. (Kayne Anderson), a Securities and Exchange Commission-registered investment adviser. As of Dec. 31, 2010, Kayne Anderson and its affiliates managed approximately $11.5 billion. Kayne Anderson has invested in MLPs and other midstream energy companies since 1998.
The ratings may be sensitive to material changes in the credit quality or 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.
Additional information is available at '[ www.fitchratings.com ]'.
The sources of information used to assess these ratings were the public domain and KA Fund Advisors, LLC.
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 ]
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.
