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Fitch Affirms Tortoise Funds' Notes and MRPS at 'AAA'/'AA',

^{Published on 2011-10-07 19:20:50 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' ratings assigned to the senior unsecured notes and 'AA' ratings assigned to the mandatory redeemable preferred shares (MRPS) issued by the following closed-end funds managed by Tortoise Capital Advisors, LLC (Tortoise):

--Tortoise Energy Infrastructure Corporation (NYSE: TYG),

--Tortoise Energy Capital Corporation (NYSE: TYY),

--Tortoise MLP Fund, Inc. (NYSE: NTG).

A full rating list is shown at the end of the release.

KEY RATING DRIVERS

The ratings are based on asset coverage provided to the senior unsecured notes and MRPS by the funds' portfolios, structural protections afforded by mandatory deleveraging provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the funds' operations and the capabilities of Tortoise as investment advisor.

LEVERAGE

As of Aug. 31, 2011, TYG total assets were $1,487.4 billion including leverage comprising approximately $195 million of unsecured senior notes, $73 million of MRPS and $28.4 million of bank borrowing. As of the same date, TYY total assets were $770.8 million including leverage comprising approximately $104.1 million of unsecured senior notes, $50 million of MRPS and $6.2 million of bank borrowing; NTG total assets were $1,521.9 million including leverage comprising approximately $255 million of unsecured senior notes and $90 million of MRPS.

ASSET COVERAGE

As of Aug. 31, 2011, the funds' asset coverage ratio for senior unsecured notes, 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 same time, the funds asset coverage ratio, as calculated in accordance with the Fitch overcollateralization (OC) test per the 'AAA' rating guidelines outlined in Fitch's applicable criteria was in excess of 100%, which is the minimum asset coverage deemed consistent with an 'AAA' rating.

In addition, the funds' asset coverage ratio for total outstanding MRPS, as calculated in accordance with the 1940 Act, was in excess of 200%, which is the minimum asset coverage level required by the 1940 Act with respect to preferred stock. The funds' 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 an 'AA' rating.

Fitch notes that all three funds issue both rated and unrated senior unsecured notes and MRPS. Fitch's OC test is designed to assess availability of the total asset coverage for all outstanding senior unsecured notes and MRPS and, therefore, Fitch includes both rated and unrated senior unsecured notes and MRPS for the purposes of its OC test in line with its published rating criteria.

Should the asset coverage tests of either the senior notes or the MRPS decline below their minimum threshold amounts and are not cured in a pre-specified timeframe, the governing documents require the funds to reduce the leverage in a sufficient amount to restore compliance with the applicable asset coverage tests.

FUNDS PROFILE

All three funds are non-diversified, closed-end management investment companies sharing a similar investment goal of obtaining a high level of total return with an emphasis on current distributions. The funds invest the majority of their portfolios in equity securities of publicly-traded MLPs and their affiliates in the energy infrastructure sector. These companies gather, transport, process, store, distribute or market natural gas, natural gas liquids, coal, crude oil, refined petroleum products or other natural resources, or explore, develop, manage or produce such commodities.

THE ADVISOR

Tortoise, a wholly owned subsidiary of Tortoise Holdings, LLC, is the fund's investment adviser, responsible for the fund's overall investment strategy and its implementation. The advisor was formed in October 2002 and, as of Sept. 30, 2011, it had approximately $6.4 billion in assets under management. Montage Asset management, LLC, a wholly-owned entity of Mariner Holdings, LLC owns approximately 65% of Tortoise Holdings, LLC, with the remaining interest held by Tortoise's five managing directors and certain other senior Tortoise employees.

RATING SENSITIVITY

The ratings assigned to the senior unsecured notes and MRPS 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 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 at '[ www.fitchratings.com ]'.

Fitch has affirmed the following ratings:

Tortoise Energy Infrastructure Corporation (NYSE: TYG):

--$110,000,000 of series E senior unsecured notes due in April 2015 at 'AAA';

--$29,975,000 of series F senior unsecured notes due in December 2012 at 'AAA';

--$30,000,000 of series G senior unsecured notes due in December 2016 at 'AAA';

--$73,000,000 of series A MRPS with a liquidation preference of $10 per share due in December 2019 at 'AA'.

Tortoise Energy Capital Corporation (NYSE: TYY):

--$39,400,000 of series D senior unsecured notes due in December 2014 at 'AAA';

--$34,700,000 of series F senior unsecured notes due in June 2013 at 'AAA';

--$50,000,000 of series B MRPS with a liquidation preference of $10 per share due in March 2018 at 'AA'.

--$15,900,000 of series E senior unsecured notes due in June 2011 Paid in Full.

Tortoise MLP Fund, Inc. (NYSE: NTG):

--$12,000,000 of series A senior unsecured notes due in December 2013 at 'AAA';

--$24,000,000 of series B senior unsecured notes due in December 2015 at 'AAA';

--$57,000,000 of series C senior unsecured notes due in December 2017 at 'AAA';

--$112,000,000 of series D senior unsecured notes due in December 2020 at 'AAA';

--$25,000,000 of series E senior unsecured notes due in December 2015 at 'AAA';

--$25,000,000 of series A MRPS due in December 2015 at 'AA';

--$65,000,000 of series B MRPS due in December 2017 at 'AA'.

Additional information is available at '[ www.fitchratings.com ]'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

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

Applicable Criteria and Related Research:

--'Closed-End Fund Debt and Preferred Stock Rating Criteria' (Aug. 16, 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:

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: Evolving Use of Leverage and Derivatives

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=559525 ]

Rating Closed-End Fund Debt and Preferred Stock

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840 ]

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