N@N

Fitch Affirms Preferred Share Ratings of AGIC Convertible Closed End Fund at 'AAA'

^{Published on 2011-03-15 11:27:13 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' ratings assigned to the following auction rate preferred shares (ARPS) issued by AGIC Convertible & Income Fund II (NYSE: NCZ), a closed-end fund sub-advised by Allianz Global Investors Capital (AGIC):

--$274,000,000 of ARPS consisting of Series A, B, C, D and E, each with a liquidation preference of $25,000 per share.

The affirmation follows Fitch's annual review of the fund. The 'AAA' ratings are based on sufficient asset coverage provided to the ARPS by the fund's underlying portfolio of assets, the 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 AGIC as the sub-advisor. Fitch's ratings assigned to the ARPS speak only to timely repayment of interest and principal in accordance with the governing documents and not to potential liquidity in the secondary market.

As of Feb. 28, 2011 the fund had assets of approximately $830 million and leverage of $288 million, or 35% of assets. Assets consisted of $739 million in cash-purchased securities and $91 million in synthetic convertible securities. Leverage consisted of approximately $14 million in current liabilities and $274 million of rated ARPS. As of the same date, the fund's asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC Tests) per the 'AAA' rating guidelines outlined in Fitch's applicable criteria, were in excess of 100%, which is the minimum asset coverage amount deemed consistent with an 'AAA' rating. The fund's governing documents require that asset coverage for the ARPS, as calculated in accordance with the Fitch OC Tests, be maintained in excess of 100%. As such, should the asset coverage decline below 100%, the governing documents require the fund to alter the composition of its portfolio towards assets with lower discount factors, or to reduce leverage in a sufficient amount to restore compliance within a 38 business day period.

Additionally, as of the same date the fund's asset coverage ratio for total outstanding ARPS, as calculated in accordance with AGIC's interpretation of the Investment Company Act of 1940, was in excess of 200%, which is also a minimum asset coverage required by the fund's governing documents.

As of Feb. 28, 2011, the portfolio consisted mainly of high-yield corporate securities, straight convertible securities and synthetic convertible securities with U.S. domicile issuers. The fund was highly diversified by industry and issuer and therefore no additional overconcentration discount factor was applied in calculating the Fitch OC Tests.

The fund is a non-diversified, closed-end management investment company, registered under the Investment Company Act of 1940, as amended. AGIC acts as the sub-adviser to the fund, performing all investment management functions. Allianz Global Investors Fund Management, LLC (AGIFM) acts as the advisor to the fund, performing all distribution, legal, operations and compliance functions. AGIC and AGIFM are indirect, majority owned subsidiary of Allianz SE. As of Dec. 31, 2010, Allianz SE had over $1.7 trillion in assets under management.

The ratings 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 web site.

Applicable Criteria and Related Research:

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

--'Fitch Launches 'CEF Updates' for Closed-End Fund's (Nov. 8, 2010);

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

--'Closed-End Fund: Redemptions Provide Some Liquidity to Illiquid ARPS Market' (Aug. 31, 2010);

--'Closed-End Fund: 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: 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 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.