N@N

NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings rates the following senior notes and mandatory redeemable preferred shares (MRPS) issued by Kayne Anderson Midstream/Energy Fund, Inc. (NYSE:KMF), a non-diversified closed-end fund managed by KA Fund Advisors, LLC:

--$50,000,000 4.00% series C senior unsecured notes due March 22, 2022 rated 'AAA';

--$30,000,000 4.50% series B MRPS due March 22, 2020 rated 'AA'.

KEY RATING DRIVERS

The ratings 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 Feb. 29, 2012, the fund's total assets were approximately $872.8 million.

DETAILS OF THE TRANSACTION

The closing date for the senior unsecured notes and MRPS was March 22, 2012. The fund intends to use the net proceeds from the sale of the senior securities to partially prepay the outstanding borrowings, to make new portfolio investments and for general corporate purposes.

LEVERAGE

As of Feb. 29, 2012, the fund's leverage was approximately $223 million, not including accrued interest, or approximately 26% of the total assets. The leverage comprised $115 million of senior unsecured notes, $35 million of MRPS and $73 million of bank borrowing.

ASSET COVERAGE

At the time of the issuance of series C senior unsecured 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 the rating assignment, 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 B 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 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 Feb. 29, 2012, Kayne Anderson and its affiliates managed approximately $15.2 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);

--'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:

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 ]

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 ]

2012 Outlook: Closed-End Fund Leverage

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

Global Rating Criteria for Asset-Backed Commercial Paper

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

Rating Closed-End Fund Debt and Preferred Stock

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

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.