Fitch Affirms Tortoise Funds' Notes at 'AAA' & MRPS at 'AA'
Fitch Ratings has affirmed the 'AAA' ratings assigned to the senior
unsecured notes and 'AA' ratings assigned to the mandatory redeemable
preferred shares (MRPS) issued by the following closed-end funds managed
by Tortoise Capital Advisors, LLC (Tortoise):
--Tortoise Energy Infrastructure Corporation (NYSE: TYG);
--Tortoise Energy Capital Corporation (NYSE: TYY);
A full list of ratings follows at the end of this release.
KEY RATING DRIVERS
The ratings are based on asset coverage provided to the senior unsecured
notes and MRPS by the funds' portfolios, structural protections afforded
by mandatory deleveraging provisions in the event of asset coverage
declines, the legal and regulatory parameters that govern the funds'
operations and the capabilities of Tortoise as investment advisor.
As of Aug. 31, 2012, TYG total assets were $1,705 million supporting
$195 million of unsecured senior notes, $73 million of MRPS and $43
million of bank borrowing. As of the same date, TYY total assets were
$873 million supporting $104 million of unsecured senior notes, $50
million of MRPS and $8 million of bank borrowing; NTG total assets were
$1,634 million supporting $255 million of unsecured senior notes, $90
million of MRPS and $1 million of bank borrowing; and TTP total assets
were $335 million supporting $49 million of unsecured senior notes, $16
million of MRPS and $12 million of bank borrowing.
As of Aug. 31, 2012, the funds' asset coverage ratios for senior
unsecured notes, as calculated in accordance with the Investment Company
Act of 1940 (1940 Act), were in excess of 300%, which is the minimum
asset coverage required by the 1940 Act. At the same time, the funds
asset coverage ratios for these notes met Fitch's applicable rating
In addition, the funds' asset coverage ratios for total outstanding
MRPS, as calculated in accordance with the Investment Company Act of
1940, were in excess of 200%, which is the minimum asset coverage level
required by the 1940 Act with respect to preferred stock, and also met
Fitch's applicable criteria rating criteria for MRPS.
Fitch notes that TYG, TYY and NTG issue both rated and unrated senior
unsecured notes. Fitch overcollateralization tests are designed to
assess availability of the total asset coverage for all outstanding
senior unsecured notes and, therefore, Fitch includes both rated and
unrated senior unsecured notes for the purposes of its
overcollateralization test in line with its published rating criteria.
Should the asset coverage tests of either the senior unsecured notes or
MRPS decline below their minimum threshold amounts and are not cured in
a pre-specified timeframe, the governing documents require the funds to
reduce the leverage in a sufficient amount to restore compliance with
the applicable asset coverage tests.
All four funds are non-diversified, closed-end management investment
companies sharing a similar investment goal of obtaining a high level of
total return with an emphasis on current distributions. The funds invest
the majority of their portfolios in equity securities of publicly-traded
Master Limited Partnerships (MLP) and their affiliates in the energy
infrastructure sector. These companies gather, transport, process,
store, distribute or market natural gas, natural gas liquids, coal,
crude oil, refined petroleum products or other natural resources, or
explore, develop, manage or produce such commodities.
Tortoise, a wholly owned subsidiary of Tortoise Holdings, LLC, is the
fund's investment adviser, responsible for the fund's overall investment
strategy and its implementation. The advisor was formed in October 2002
and, as of Aug. 31, 2012, it had approximately $8.6 billion in assets
under management. Montage Asset management, LLC, a wholly-owned entity
of Mariner Holdings, LLC owns approximately 61% of Tortoise Holdings,
LLC, with the remaining interest held by Tortoise's five managing
directors and certain other senior Tortoise employees.
The ratings assigned to the senior unsecured notes and MRPS may be
sensitive to material changes in the credit quality or market risk
profiles of the funds. A material adverse deviation from Fitch
guidelines for any key rating driver could cause the rating to be
lowered by Fitch. Given the funds' primary investment focus on the
energy infrastructure sector, the fund ratings may also be sensitive to
adverse changes in the economic conditions of the sector.
For additional information about Fitch closed-end fund ratings
guidelines, please review the criteria referenced below, which can be
found on Fitch's website at 'www.fitchratings.com'.
Fitch has affirmed the following ratings
Tortoise Energy Infrastructure Corporation:
--$110,000,000 of series E senior unsecured notes due in April 2015 at
--$29,975,000 of series F senior unsecured notes due in December 2012 at
--$30,000,000 of series G senior unsecured notes due in December 2016 at
--$73,000,000 of series A MRPS with a liquidation preference of $10 per
share due in December 2019 at 'AA'.
Tortoise Energy Capital Corporation:
--$39,400,000 of series D senior unsecured notes due in December 2014 at
--$34,700,000 of series F senior unsecured notes due in June 2013 at
--$50,000,000 of MRPS with a liquidation preference of $10 per share due
in March 2018 at 'AA'.
Tortoise MLP Fund, Inc.:
--$12,000,000 of series A senior unsecured notes due in December 2013 at
--$24,000,000 of series B senior unsecured notes due in December 2015 at
--$57,000,000 of series C senior unsecured notes due in December 2017 at
--$112,000,000 of series D senior unsecured notes due in December 2020
--$25,000,000 of series E senior unsecured notes due in December 2015 at
--$25,000,000 of series A MRPS due in December 2015 at 'AA';
--$65,000,000 of series B MRPS due in December 2017 at 'AA'.
Tortoise Pipeline & Energy Fund, Inc.:
--$10,000,000 of series A senior unsecured notes due in December 2016 at
--$17,000,000 of series B senior unsecured notes due in December 2014 at
--$6,000,000 of series C senior unsecured notes due in December 2018 at
--$16,000,000 of series D senior unsecured notes due in December 2021 at
--$16,000,000 of series A MRPS due in December 2018 at 'AA'.
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 Tortoise.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 15, 2012).
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Fitch Ratings Brian Bertsch, +1-212-908-0549 Media Relations,
New York firstname.lastname@example.org or Primary
Analyst: Viktoria Baklanova, Ph.D, CFA, +1-212-908-9162 Senior
Director Fitch, Inc. One State Street Plaza New York, NY
10004 or Secondary Analyst: Gwen Fink-Stone, J.D.,
+1-212-908-9128 Associate Director or Committee
Chairperson: Davie Rodriguez, CFA, +1-212-908-0528 Senior