New York, April 17, 2013 -- Moody's Investors Service ("Moody's") has assigned
Aa2 long-term ratings and P-1 short-term ratings
to Variable Rate Demand Preferred (VRDP) shares issued by two state-specific
closed-end funds managed by Nuveen Fund Advisors, LLC (Nuveen).
Royal Bank of Canada (RBC), acting through its WFC, New York,
Branch (Aa3/P-1, stable), has entered into VRDP Purchase
Agreements to provide liquidity support to the VRDP shares. The
VRDP shares' short-term ratings are based on the liquidity support
from the VRDP Purchase Agreement provider and are therefore linked to
the short-term rating of the Royal Bank of Canada. The Aa2
long-term ratings of the VRDP shares are based on the funds'
adjusted leverage, portfolio profiles and fixed charge coverage,
as calculated by Moody's, combined with an assessment of the VRDP
shares' relative priority of claim.
The newly assigned ratings for the VRDP shares of the two funds are listed
below, along with their corresponding VRDP shares:
Nuveen New Jersey Premium Income Municipal Fund, Inc. (NNJ),
886 Series 2 Variable Rate Demand Preferred Shares (VRDP) with a liquidation
preference of $100,000 per share, for a total of $88.6
million, mandatory redemption April 1st, 2043; Royal
Bank of Canada, acting through its WFC, New York, Branch,
Aa2/P-1
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
(NQJ), 1,443 Series 2 Variable Rate Demand Preferred Shares
(VRDP) with a liquidation preference of $100,000 per share,
for a total of $144.3 million, mandatory redemption
April 1st, 2043; Royal Bank of Canada, acting through
its WFC, New York, Branch, Aa2/P-1
RATINGS RATIONALE
Short-Term Ratings
Summary
The short-term ratings are based upon the VRDP Purchase Agreements
provided by Royal Bank of Canada, acting through its WFC,
New York, Branch, which ensures that VRDP holders will be
able to tender their shares unconditionally based on the bank's
support as the liquidity provider.
The VRDP shares issued by NNJ and NQJ were exchanged for previously outstanding
VRDP shares with a Purchase Agreement that had been provided by Citibank,
N.A. A3/P-2. Upon the completion of the exchange,
the old VRDP shares will be terminated and their ratings withdrawn.
Credit Discussion
The liquidity provider agrees to purchase any rated shares of the applicable
fund that have been tendered for and not successfully remarketed on the
seventh day after notice of tender. The VRDP Purchase Agreements
have no automatic termination events or conditions precedent to funding,
making them unconditional agreements to purchase un-remarketed
shares. The Prime-1 ratings of the VRDP shares are fully
linked to the rating of the liquidity provider and are dependent on the
validity of the VRDP Purchase Agreements which, in the case of RBC
is scheduled to terminate as of April 16th, 2014, subject
to further extension thereafter as provided in the agreement.
VRDP shareholders have the option to tender their VRDP shares for remarketing
and purchase seven business days after providing notice to the tender
and paying agent. If the remarketing agent is unable to sell any
or all of the tendered shares submitted by VRDP shareholders pursuant
to either a mandatory tender event or an optional tender, the tender
and paying agent will deliver all unsold VRDP shares to the Liquidity
Provider for purchase on such purchase date.
In addition to optional tenders, the VRDP Purchase Agreement includes
mandatory purchase events to address "roll over" risk of its stated maturity
and any unscheduled termination of the VRDP Purchase Agreement.
Additionally, VRDP shares are subject to mandatory tender for remarketing
upon the occurrence of mandatory tender events, which include:
(a) failure of the fund to pay scheduled dividends; (b) downgrade
of the liquidity provider rating to a certain level; (c) failure
of the fund to remit fees to the liquidity provider for services rendered
(if declared a mandatory tender event by the liquidity provider);
(d) occurrence of an extraordinary corporate event; (e) substitution
of the liquidity provider; (f) designation of a special rate period,
and (g) breach of an effective leverage covenant continued for 60-days
(if declared a mandatory tender event by the liquidity provider).
The Liquidity Provider has a mandatory purchase obligation with respect
to all outstanding VRDP shares upon termination of the VRDP Purchase Agreement
and to the extent that an alternate VRDP Purchase Agreement is not put
in place. The occurrence of any mandatory purchase events would
begin a process whereby all VRDP holders would be notified of a mandatory
purchase event and their shares subject to purchase by the liquidity provider.
Long Term Ratings
NNJ and NQJ, with managed assets of about $283.3 million
and $465.0 million, respectively, as of March
31, 2013, seek current income exempt from both regular Federal
and New Jersey personal income taxes. The funds are modestly levered
with effective leverage ranging from 35% to 36%, including
tender option bonds.
The long-term ratings assigned to the VRDP Shares are based on
the following key rating factors:
Adjusted Leverage
Risk adjusted asset coverage ratios are strong and the risk of an Investment
Company of 1940 Act (1940 Act) breach, as calculated by Moody's
based on portfolio volatility, is low for each of the funds.
For NNJ and NQJ, asset coverage is 147% and 166%,
respectively, and standard deviations of 6.5 times and 6.3
times, respectively, consistent with scores of Aaa for these
metrics.
Portfolio Profile
The funds' portfolio profiles, which capture the credit quality
and liquidity of both fund's holdings, reflect the strong credit
quality of municipal holdings that are invested primarily in New Jersey
(Aa3, stable), across various general obligation, tax
obligation, revenue bonds, pre-refunded bonds as well
as other security types. Both funds have a weighted average credit
quality of A2.
This is offset by weaker liquidity metrics, and in the case of the
state-specific funds' their single-state focus concentration,
which could be exacerbated in any future municipal market downturn.
Fixed Charge Coverage
The long-term ratings of the VRDP shares are further supported
by 11.5x fixed charge coverage ratios, calculated on a trailing
one year basis, evidencing the strong capacity on the part of NNJ
and NQJ to meet periodic dividend payments from recurring earnings.
Relative Priority of Claim
In addition to assessing the key rating factors described above,
Moody's considers the priority of claim of a fund's specific security
types and any other qualitative factors relevant to the fund's credit
profile. In the case of preferred securities, which is the
instrument class associated with these ratings, a one-notch
downward adjustment from the rating suggested by the key factors is made
to reflect the weaker position of investors holding preferred stock relative
to those holding senior unsecured debt obligations.
The methodologies used in this rating were "Moody's Methodology for Rating
Securities Issued by U.S. Closed-End Funds" published
in May 2012, and "Applying Global Joint Default Analysis to Letter
of Credit Backed Transactions in the U.S. Public Finance
Sector" published in October 2010. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Michael DeCavalcante, CFA, FRM
Analyst
Managed Investments Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Yaron Ernst
MD - Managed Investments
Managed Investments Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Aa2/P-1 ratings to preferred shares issued by two New Jersey closed-end funds managed by Nuveen
