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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' rating assigned to auction-rate preferred shares (ARPS) issued by the following two municipal closed-end funds sub-advised by Western Asset Management Company (Western Asset):

Western Asset Intermediate Muni Fund Inc. (NYSE AMEX: SBI)

--$50,000,000 of ARPS consisting of series M with a liquidation preference of $25,000 per share.

Western Asset Managed Municipals Fund Inc. (NYSE: MMU)

--$250,000,000 of ARPS consisting of series M, T, W, Th and F, each with a liquidation preference of $25,000 per share.

KEY RATING DRIVERS

The 'AAA' rating is based on asset coverage provided to preferred shares by the funds' portfolio, structural protections afforded by mandatory cure and deleveraging provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the funds' operations and the capabilities of Western Asset as investment manager.

LEVERAGE

As of Jan. 31, 2012, SBI's leverage was approximately $50 million, or 26% of total assets of $196 million. Leverage consisted predominantly of rated ARPS, with an immaterial amount also invested in an inverse floater of a tender option bond. As of the same date, MMU's leverage was approximately $250 million, or 30% of total assets of $836 million. Leverage consisted entirely of rated ARPS.

ASSET COVERAGE

At the time of the rating affirmation, the funds' asset coverage ratio for preferred stock, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), was in excess of 200%, which is the minimum asset coverage required by the 1940 Act. Also, at the time of this affirmation, the funds' asset coverage ratio, as calculated in accordance with the Fitch total and net overcollateralization tests per the 'AAA' rating guidelines outlined in Fitch's applicable criteria were in excess of 100%, which are the minimum asset coverage deemed consistent with an 'AAA' rating and the minimum asset coverage required by the fund's governing documents.

Should the asset coverage tests of the ARPS decline below their minimum threshold amounts (as tested on the last business day of each month), 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 58 business day period.

FUND PROFILES

As of Jan. 31, 2012, the portfolios consisted mainly of investment grade municipal securities. MMU employed higher leverage and invested in longer maturity assets than SBI, consistent with each fund's investment objective. Both portfolios were well diversified from sector, obligor and state levels.

THE ADVISOR

Western Asset acts as the sub-adviser to the funds, performing all investment management functions. As of Dec. 31, 2011, Western Asset had approximately $443 billion in assets under management. Legg Mason Partners Fund Advisor, LLC (Legg Mason) acts as the advisor to the fund and performs all legal, operational, compliance and distribution functions. Western Asset and Legg Mason are wholly owned subsidiaries of Legg Mason Inc.

RATING SENSITIVITY

The rating assigned to the ARPS may be sensitive to material changes in the leverage composition, credit quality of portfolio assets or market risk profile 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 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, Western Asset and Legg Mason.

Applicable Criteria and Related Research:

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

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

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