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Fitch Affirms VRDP Shares Issued by BlackRock Muni Intermediate Duration Fund, Inc.


Published on 2012-03-16 12:36:34 - Market Wire
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NEW YORK--([ ])--Fitch Ratings affirms the variable rate demand preferred shares (VRDP Shares) issued by BlackRock Muni Intermediate Duration Fund, Inc. (NYSE:MUI), a closed-end fund, as follows:

--$287,100,000 of VRDP Shares, series W-7, with a liquidation preference of $100,000 per share, affirmed at 'AAA/F1+'.

The 'F1+' short-term rating reflects the rating of the liquidity provider, JPMorgan Chase Bank, N.A, (rated 'AA-/F1+' by Fitch). The fund is managed by BlackRock Advisors, LLC.

KEY RATING DRIVERS

The 'F1+' short-term rating primarily reflects:

--The credit strength of the VRDP Shares liquidity provider;

--The terms and conditions of the VRDP Shares purchase agreement (purchase agreement).

The 'AAA' long-term rating primarily reflects:

--Sufficient asset coverage provided to the VRDP Shares as calculated per the fund's asset coverage tests;

--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;

Both the short- and long-term ratings also reflect the capabilities of BlackRock as investment advisor.

TENDER AND REMARKETING

The VRDP Shares benefit from a feature giving investors the right to tender the securities with a seven-day notice for remarketing. The VRDP Shares are also subject to a mandatory tender for remarketing upon the occurrence of certain events, such as non-payment of dividends by the fund, among others. VRDP Shares that are unsuccessfully remarketed are purchased by the liquidity provider.

The VRDP Shares have a 30-year mandatory redemption date and pay an adjustable dividend rate set weekly by the remarketing agent. Should a remarketing be unsuccessful, the dividend rate will reset to a maximum rate as defined in the VRDP Shares' governing documents.

PURCHASE OBLIGATION

The VRDP Shares are supported by a purchase agreement to ensure full and timely repayment of the liquidation preference amount plus any accumulated and unpaid dividends to holders upon occurrence of certain events. The agreement requires the liquidity provider to purchase all VRDP Shares tendered for sale that were not successfully remarketed. The liquidity provider must also purchase all outstanding VRDP Shares if the fund has not obtained an alternate purchase agreement prior to the termination of the purchase agreement being replaced or following the downgrade of the liquidity provider's ratings below 'F2' (or equivalent).

The purchase of VRDP Shares pursuant to the purchase agreements is unconditional and irrevocable, and as such the short-term ratings assigned to the VRDP Shares are directly linked to the short-term creditworthiness of the liquidity provider.

The liquidity provider's obligation under the purchase agreement has a scheduled termination date. Fitch expects the purchase agreement to be subsequently extended, with terms that are substantially similar to the current purchase agreement.

ASSET COVERAGE

As of Feb. 26, 2012, the fund's pro forma asset coverage ratios, as calculated in accordance with the Fitch total and net over-collateralization tests per the 'AAA' rating guidelines outlined in Fitch's criteria, were in excess of 100%, which is the minimum threshold required under the VRDP Shares' governing documents.

As of the same date, the fund's asset coverage ratio for the VRDP Shares, as calculated in accordance with the Investment Company Act of 1940, were in excess of the minimum asset coverage threshold of 225% as currently set by the terms of the fee agreement between the fund and the liquidity provider and the VRDP Shares' governing documents.

The fund has also covenanted with the liquidity provider to maintain an effective leverage ratios for both VRDP Shares and floating-rate certificates of tender option bonds below 45% (or 46% if the increase in the ratio is due exclusively to asset market value volatility). The fund's Effective Leverage Ratio is currently below 45%.

In the event of asset coverage decline, the VRDP Shares' governing documents will require the fund to reduce leverage in order to restore compliance with the particular test(s) breaching the required threshold(s).

FUND PROFILE

BlackRock Muni Intermediate Duration Fund, Inc. is a non-diversified, closed-end management investment company that commenced investment operations on Aug. 1, 2003. The fund seeks to provide shareholders with high current income exempt from federal income taxes by investing primarily in a portfolio of municipal obligations, the interest on which is exempt from federal income taxes. Under normal circumstances, the fund invests at least 80% of net assets in municipal bonds with duration of three to 10 years. Also under normal circumstances, the fund invests at least 75% of total assets that are rated at least 'BBB' by Fitch or equivalent.

FUND ADVISOR

BlackRock Advisors, LLC, a subsidiary of BlackRock, Inc., is the fund's advisor, responsible for the overall investment strategies and their implementation. BlackRock, Inc. and its affiliates had approximately $3.3 trillion of assets under management as of Sept. 30, 2011.

RATINGS SENSITIVITY

The ratings assigned to the VRDP Shares may be sensitive to material changes in the leverage composition, portfolio credit quality, portfolio diversification or market risk of the fund, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.

Certain terms of the Minimum VRDP Shares Asset Coverage Test and Effective Leverage Ratio are set in the fee agreement, which are renewed on a periodic basis. Changes to these terms that weaken the tests may have negative rating implications.

The short-term ratings assigned to the VRDP Shares may also be sensitive to changes in the financial condition of the liquidity provider. A downgrade of the liquidity provider to 'F2' would result in a downgrade of the short-term rating of the VRDP Shares to 'F2,' absent other mitigants. A downgrade below 'F2', on the other hand, would not necessarily result in a downgrade of the short-term rating of the VRDP Shares, given the acceleration features in the transaction that would result in a mandatory tender of the VRDP Shares for purchase by the liquidity provider.

For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by closed-end fund, 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 BlackRock Advisors, LLC.

Applicable Criteria and Related Research:

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

--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 10, 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 ]

Global Rating Criteria for Asset-Backed Commercial Paper

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=655450 ]

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 ]

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.

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