N@N

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has assigned a 'AAA' rating to the Variable Rate Municipal Term Preferred Shares (VMTP Shares) issued by Federated Premier Municipal Income Fund (NYSE:FMN) and simultaneously affirmed the 'AAA' rating on the remaining outstanding auction market preferred shares (AMPS), following a voluntary tender offer which expired on Dec. 20, 2011. Federated Premier Municipal Income Fund is a municipal bond closed-end fund managed by Federated Investment Management Company (Federated) with $124 million of total assets as of Dec. 20, 2011. The following rating actions are effective immediately:

--$18,425,000 of VMTP Shares, series 2014, with a liquidation preference of $25,000 per share, due Dec. 22, 2014, rated 'AAA';

--$18,150,000 of AMPS, series A, with a liquidation preference of $25,000 per share, affirmed at 'AAA'.

KEY RATING DRIVERS

The 'AAA' ratings assigned to the VMTP Shares and AMPS are based on asset coverage provided to each series of preferred shares 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 ratings on the VMTP Shares and AMPS speak only to the credit risk of the securities and not to potential liquidity in the secondary market.

TENDER OFFER

The fund's issuance of VMTP Shares was undertaken to replace AMPS that will be purchased as a result of the fund's voluntary tender offer for up to 100% of AMPS at a price equal to 96% of liquidation preference and unpaid dividends. The tender offer ended on Dec. 20, 2011 with 50.4% of AMPS being tendered. As a result of the tender offer and the corresponding issuance of VMTP Shares, the fund's leverage remains largely unchanged.

Fitch does not view the fund's purchase of AMPS at a price less than the full liquidation preference amount as a credit event in the form of distressed debt exchange, given that the tender offer was fully discretionary for investors, shares were redeemed for cash and there no changes to the terms (such as dividend rate) of the remaining AMPS.

Regardless of the rating implications, Fitch notes that the fund's purchase of the AMPS at a price discounted to full liquidation preference differs from the practice of many other funds which elected to redeem similar securities at full liquidation preference.

LEVERAGE

As of Dec. 22, 2011, the fund's total leverage was approximately $53.7 million, or 38% of the total assets. Leverage consisted of $18.4 million of VMTP Shares, $18.2 million of AMPS and $17.1 million of floating-rate certificates of tender option bonds.

ASSET COVERAGE

With the issuance of the VMTP Shares, the fund now has four main tests for maintaining overcollateralization of outstanding leverage, versus two previously. The VMTP Shares introduced two new asset coverage tests. In addition, the AMPS maintain asset coverage of at least 100% as calculated by the Fitch total and net overcollateralization (OC) tests per the 'AAA' rating guidelines outlined in Fitch's criteria and also adhere to the 200% asset coverage test per the Investment Company Act of 1940.

Should the fund fail to satisfy the two new asset coverage tests, the VMTP Shares governing documents' mandatory redemption provisions will require the fund to reduce the leverage in a sufficient amount to restore compliance with the applicable test(s).

Using portfolio data as of Nov. 30, 2011, Fitch calculated the OC tests and found ratios were in excess of the minimum thresholds required for each test.

STRESS TESTS

Fitch performed various stress tests on the fund to assess the strength of the structural protections available to the VMTP Shares compared to the rating stresses outlined in Fitch's closed-end fund rating criteria since asset coverage as calculated by Fitch OC tests is not a deleveraging trigger for these securities. These tests included determining various 'worst case' scenarios where the fund's leverage and portfolio composition migrated to the outer limits of its operating and investment guidelines.

Only under remote circumstances, such as increasing the fund's issuer concentration, while simultaneously migrating the portfolio to 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds, did the asset coverage available to the VMTP Shares fall below the 'AAA' threshold, and instead passed at an 'AA' rating level.

Given the highly unlikely nature of these stress scenarios, combined with their minimal rating impact, Fitch views the fund's permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AAA' rating.

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 investment-grade securities that pay interest exempt from federal income tax, including AMT. Substantially all of the fund's assets (at least 90%) are invested in tax-exempt securities.

From a credit quality perspective, the fund's investment parameters 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 will be made in securities rated below a 'B' rating, or deemed as such by the fund's internal credit ratings.

THE ADVISOR

Federated serves as the fund's investment advisor, and is a direct wholly owned subsidiary of Federated Investors, Inc.

As of Sept. 30, 2011, Federated Investors, Inc. and affiliates had approximately $351.7 billion in assets under management.

RATING SENSITIVITY

The ratings assigned to the VMTP Shares and 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 downgraded 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 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 Federated.

Applicable Criteria and Related Research:

--'2012 Outlook: Closed-End Fund Leverage' (Dec. 19, 2011)

--'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 AMPS 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 ]

2012 Outlook: Closed-End Fund Leverage

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=660709 ]

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 ]

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.