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Fitch Affirms Preferred Share Ratings of 2 Pioneer Municipal Closed End Funds at 'AAA'

^{Published on 2011-03-16 14:16:00 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' ratings assigned to the following auction market preferred shares (AMPS) issued by Pioneer Municipal High Income Trust (NYSE: MHI) and Pioneer Municipal High Income Advantage Trust (NYSE: MAV), both of which are leveraged municipal closed-end funds advised by Pioneer Investments Management (Pioneer):

Pioneer Municipal High Income Trust (MHI):

--$50,000,000 of auction market preferred shares, series A, with a liquidation preference of $25,000 per share;

--$51,000,000 of auction market preferred shares, series B, with a liquidation preference of $25,000 per share.

Pioneer Municipal High Income Advantage Trust (MAV):

--$75,000,000 of auction market preferred shares, series A, with a liquidation preference of $25,000 per share;

--$75,000,000 of auction market preferred shares, series B, with a liquidation preference of $25,000 per share.

The main drivers of the rating affirmations are sufficient asset coverage provided to the AMPS by the 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 Pioneer as investment advisor. Fitch's ratings assigned to the AMPS speak only to the credit risk of the securities and not to potential liquidity in the secondary market.

As of Feb. 11, 2011, MHI's total assets were approximately $461 million and total leverage was approximately $182 million or 39% of total assets, consisting of $101 million of AMPS and $57 million of floating rate securities of tender option bonds. As of the same date, MAV's total assets were approximately $476 million and total leverage was approximately $207 million, or 43% of total assets, consisting of $101 million of AMPS and $57 million of floating rate securities of tender option bonds.

At the time of the rating affirmations, the funds' 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 funds' governing documents require that asset coverage for the AMPS, 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 funds to alter the composition of their portfolio toward assets with lower discount factors, or to reduce leverage in a sufficient amount to restore compliance within a 40 business day period.

Additionally, as of the same date, the funds' asset coverage ratios for total outstanding AMPS, as calculated in accordance with Pioneer's interpretation of the Investment Company Act of 1940, were in excess of 200%, which is also a minimum asset coverage required by the funds' governing documents.

MHI is a diversified closed-end management investment company, registered under the Investment Company Act of 1940, as amended, that commenced investment operations in July 2003. MAV is a diversified closed-end management company, registered under the Investment Company Act of 1940, as amended, that commenced operations in October 2003. The funds' investment objectives are similar in that they seek to provide a high level of current income exempt from regular federal income tax with a secondary investment objective of capital appreciation. The funds seek to invest in assets consisting primarily of municipal securities, the interest on which is exempt from regular Federal income tax and preferred securities that are eligible to pay dividends which qualify for the long term capital gains rate for individual investors.

As of Feb. 11, 2011, MHI's portfolio consisted of approximately 81% municipal securities and 19% among cash, common stock, and corporate bonds. The municipal portion of the portfolio included exposure to the health care (27%), higher education (18%), lease & tax-backed (16%) and other municipal (16%) municipal sectors. Any amounts over the Fitch municipal sector guideline of 25% discounted with an additional 10% haircut when calculating the Fitch OC tests. As of the same date, the fund's top exposures, by state, were Texas (13%), Illinois (11%), New York (9%) and Connecticut (8%).

As of Feb. 11, 2011, MAV's portfolio consisted of approximately 81% municipal securities and 19% among cash, common stock, and corporate bonds. The municipal portion of the portfolio included exposure to the health care (31%), lease & tax-backed (15%) and transportation (13%) municipal sectors. Any amounts over the Fitch municipal sector guideline of 25% are discounted with an additional 10% haircut when calculating the Fitch OC tests. As of the same date, the fund's top exposures, by state, were California (14%), Texas (10%), New Jersey (9%) and Massachusetts (5%).

Pioneer acts as the funds' investment advisor and is a wholly owned subsidiary of Pioneer Global Asset Management S.p.A., an investment management arm of UniCredit Banking Group. As of Jan. 31, 2011, Pioneer Global Asset Management S.p.A. had approximately $253 billion of assets under management.

The ratings may be sensitive to material changes in the credit quality or market risk profiles of the funds. 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 Pioneer Investments.

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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