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Fitch Affirms Federated Premier Intermediate Municipal Income Fund Pfd Shares at 'AAA'

^{Published on 2011-09-30 11:56:55 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings affirms the 'AAA' rating of the following auction market preferred shares (AMPS) issued by Federated Premier Intermediate Municipal Income Fund (NYSE:FPT), a municipal closed-end fund managed by Federated Investment Management Company (Federated):

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

KEY RATING DRIVERS

The 'AAA' rating is based on asset coverage provided to the AMPS by the fund's portfolio, structural protections afforded by mandatory deleveraging provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the fund's operations and the capabilities of Federated as investment advisor. Fitch's rating on the AMPS speaks only to the credit risk of the security and not to potential liquidity in the secondary market.

LEVERAGE

As of Aug. 31, 2011, the fund's leverage was approximately $61 million, or 39% of the total assets of approximately $158 million. Leverage consisted of $41.9 million of AMPS and $19.1 million of floating-rate certificates of tender option bonds.

ASSET COVERAGE

As of Aug. 31, 2011, the fund's pro forma asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization (OC) tests per the 'AAA' rating guidelines outlined in Fitch's criteria, were 175% and 218%, respectively. Both tests are in excess of 100%, which is the minimum threshold required under the fund's governing documents.

As of the same date, the fund's pro forma asset coverage ratio for total outstanding preferred shares, as calculated in accordance with the Investment Company Act of 1940, was approximately 332%, which is in excess of the minimum asset coverage of 200% required by the fund's governing documents.

Should these tests decline below the threshold amounts, the governing documents' mandatory redemption provisions will require the fund to reduce the leverage in a sufficient amount to restore compliance with the test(s).

FUND PROFILE

Federated Premier Municipal Income Fund is a diversified, closed-end management investment company that commenced investment operations in 2002. The fund invests primarily in intermediate-term, investment-grade securities that pay interest exempt from federal income tax, including AMT. Per prospectus, substantially all of the fund's assets (at least 90%) are invested in tax-exempt securities.

From a credit quality perspective, the fund's prospectus mandates that at the time of purchase, at least 80% of the fund's total assets will be invested in securities of investment-grade credit quality, no more than 20% of its total assets will be invested in securities rated below investment-grade, and no investments may be made in securities rated below a 'B' rating, or deemed as such by fund's internal credit ratings.

THE ADVISOR

Federated Investment Management Company serves as the fund's investment advisor. Federated Investment Management Company is a direct wholly owned subsidiary of Federated Investors, Inc. As of June 30, 2011, Federated Investors, Inc. had approximately $349.4 billion in assets under management.

RATING SENSITIVITY

The rating assigned to the AMPS may be sensitive to material changes in the leverage composition, credit quality of portfolio assets 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 rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at [ www.fitchratings.com ].

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

The sources of information used to assess this rating were the public domain and Federated.

Applicable Criteria and Related Research:
--'Closed-End Fund Debt and Preferred Stock Rating Criteria' (Aug. 16, 2011);
--'Tax-Exempt CEFs Change Leverage' (June 17, 2011);
--'Tax-Exempt Closed-End Funds Weather Price Declines' (Feb. 2, 2011);
--'Closed-End Funds: Evolving Use of Leverage and Derivatives' (Sept. 27, 2010);
--'Closed-End Funds: Redemptions Provide Some Liquidity to Illiquid ARPS Market' (Aug. 31, 2010).

Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840 ]
Tax-Exempt CEFs Change Leverage (ARPS Balances Reduced; New Securities Provide Flexibility)
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637110 ]
Tax-Exempt Closed-End Funds Weather Price Declines (Asset Coverage Remains Strong)
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=601825 ]
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 ]

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