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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the following senior securities issued by Kayne Anderson Midstream/Energy Fund, Inc. (NYSE: KMF), a closed-end, non-diversified investment management company advised by KA Fund Advisors, LLC:

--$55,000,000 3.93% Series A senior unsecured notes due March 3, 2016 at 'AAA';

--$60,000,000 4.62% Series B senior unsecured notes due March 3, 2018 at 'AAA';

--$35,000,000 5.32% Series A mandatory redeemable preferred shares (MRPS) due March 3, 2018 at 'AA'.

KEY RATING DRIVERS

The rating affirmations reflect:

--Sufficient asset coverage relative to Fitch's published criteria.

--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.

--The capabilities of KA Fund Advisors, LLC as investment advisor. As of Jan. 31, 2012, the fund's total assets were approximately $852.4 million.

LEVERAGE

As of Jan. 31, 2012, the fund's leverage was approximately $204 million, not including accrued interest, or 24% of the total assets. The leverage comprised $115 million of senior unsecured notes, $35 million of MRPS and $54 million of bank borrowing.

ASSET COVERAGE

At the time of the rating affirmations of the series A and B notes, the fund's asset coverage ratios, 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 time of affirmation, the fund's asset coverage ratios, as calculated in accordance with the Fitch overcollateralization (OC) test per the 'AAA' rating guidelines outlined in Fitch's 'Closed-End Fund Debt and Preferred Stock Rating Criteria' was in excess of 100%, which is the minimum asset coverage deemed consistent with Fitch's 'AAA' criteria.

In addition, the fund's asset coverage ratio for series A MRPS, as calculated in accordance with the Investment Company Act of 1940, was in excess of 200%, which is the minimum asset coverage level required by the 1940 Act with respect to preferred stock. The fund's 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 Fitch's 'AA' criteria.

THE FUND

Kayne Anderson Midstream/Energy Fund, Inc. is a non-diversified, closed-end fund, which commenced its operations on Nov. 24, 2010. The fund's investment objective is to provide a high level of total return with an emphasis on making quarterly cash distributions to its common stockholders. The fund seeks to achieve that investment objective by investing at least 80% of its total assets in the securities of companies in the Midstream/Energy Sector, consisting of midstream master limited partnerships (MLPs), midstream companies, other MLPs and other energy companies.

THE ADVISOR

KA Fund Advisors, LLC is the fund's investment adviser, responsible for implementing and administering the fund's investment strategy. It is a subsidiary of Kayne Anderson Capital Advisors, L.P. (Kayne Anderson), a Securities and Exchange Commission-registered investment adviser. As of Dec. 31, 2011 Kayne Anderson and its affiliates managed approximately $14.2 billion. Kayne Anderson has invested in MLPs and other midstream energy companies since 1998.

RATINGS SENSITIVITY

The ratings may be sensitive to material changes in the credit quality 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 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 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 these ratings were the public domain and KA Fund Advisors, LLC.

Applicable Criteria and Related Research:

-'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);

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

--'Closed-End Funds: Derivatives Under Review' (Nov. 16, 2011);

--'Primer: CEF Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).

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 ]

2012 Outlook: Closed-End Fund Leverage

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

Closed-End Funds: Derivatives Under Review (Increased Use and Limited Transparency Are Key Considerations)

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656591 ]

Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target Short-Term, Money Market Investors)

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654295 ]

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