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);
--Tortoise MLP Fund, Inc. (NYSE: NTG);
--Tortoise Pipeline & Energy Fund (NYSE: TTP).
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 criteria.
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 'AAA';
--$29,975,000 of series F senior unsecured notes due in December 2012 at 'AAA';
--$30,000,000 of series G senior unsecured notes due in December 2016 at 'AAA';
--$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 'AAA';
--$34,700,000 of series F senior unsecured notes due in June 2013 at 'AAA';
--$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 'AAA';
--$24,000,000 of series B senior unsecured notes due in December 2015 at 'AAA';
--$57,000,000 of series C senior unsecured notes due in December 2017 at 'AAA';
--$112,000,000 of series D senior unsecured notes due in December 2020 at 'AAA';
--$25,000,000 of series E senior unsecured notes due in December 2015 at 'AAA';
--$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 'AAA';
--$17,000,000 of series B senior unsecured notes due in December 2014 at 'AAA';
--$6,000,000 of series C senior unsecured notes due in December 2018 at 'AAA';
--$16,000,000 of series D senior unsecured notes due in December 2021 at 'AAA';
--$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).
Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock