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28 May 2003
MOODY'S ASSIGNS Aaa RATINGS TO FUND PREFERRED SHARES ISSUED BY NUVEEN PREFERRED AND CONVERTIBLE INCOME FUND
Approximately $708.0 Million of Preferred Securities Affected.
New York, May 28, 2003 -- Moody's Investors Service assigned ratings of Aaa to fund preferred shares
issued by the Nuveen Preferred and Convertible Income Fund. (NYSE:
JPC), a recently launched diversified, closed-end fund
trading on the New York Stock Exchange. The Fund has issued five
series of preferred securities (M, T, W, TH, F,
F2), each with 4,720 shares and a liquidation preference of
$25,000 which pay dividends that are determined on a seven
day Dutch auction basis. Moody's Aaa ratings reflect its assessment
that the preferred shares issued from this closed-end fund constitute
top quality investments with good asset protection and low risk of dividend
impairment consistent with the expected loss profile of other Aaa rated
The Fund's primary investment objective is high current income while its
secondary objective is total return. To this end, the Fund
will employ a multistrategy pursuant to which, under normal circumstances,
it will invest at least 80% of its managed assets in preferred
securities, convertible securities and related instruments.
The Fund may invest up to 20% of its managed assets in other securities,
including debt instruments and common stocks acquired upon conversion
of a convertible security (such common stocks not normally to exceed 5%
of the Fund's managed assets).
The ratings reflect an assessment that the market value of the underlying
assets of the portfolio is sufficient to provide good asset protection
to investors in the preferred stock issued by this Fund. In addition
to satisfying regulatory requirements, Moody's rating guidelines
establish that funds support preferred stock issues with eligible assets
in amounts that are sufficient to withstand a severe loss in value.
To meet Aaa preferred stock rating guidelines, funds adhere to stricter
diversification standards by seeking to reduce underlying obligor concentrations.
These rating agency guidelines supplement regulatory requirements which
mandate asset coverage ratios of 200% to cover the fund's liabilities
pursuant to the Investment Company Act of 1940. Moody's Aaa ratings
assigned to the preferred shares also reflect the credit quality of the
underlying assets in the portfolio which largely consist of investment
grade issuers. In support of the Aaa ratings on the preferred shares,
Moody's also cites the Fund's asset allocation strategy and conservative
single issuer diversification parameters that serve to strengthen the
asset coverage of the preferred shares.
The goal of the multistrategy approach is to effectively capture the diversification
benefits provided by the low return-correlation across the three
asset classes, namely preferred stock, convertible securities
and other debt instruments, and at the same time provide the potential
for high income generation and capture the opportunity to participate
in rising equity markets with some protection against risks associated
with rising interest rates. Nuveen Investment Advisory Corporation
(NIAC) believes that the opportunity will exist from time-to-time
to potentially enhance the Fund's total return by over-weighting
or under-weighting these asset classes as the relative attractiveness
of the asset classes changes. Initially, NIAC has allocated
approximately 60%, 30% and 10% of the Fund's
managed assets to preferred securities, convertible securities and
other debt instruments, respectively. The Fund's assets allocated
to preferred securities are managed by Spectrum Asset Management.
The Fund's assets allocated to convertible securities are managed by Froley,
Revy; and the Fund's assets allocated to other debt instruments are
managed by NIAC.
At the time of their issuance, the Fund's preferred shares constitute
approximately 33% of the total capital of the Nuveen Preferred
and Convertible Income Fund. Moody's notes that under current market
conditions the new Fund, by issuing preferred obligations and investing
the net proceeds of such issuance in accordance with the Fund's investment
policies, could increase earnings per common share.
Nuveen Investment Advisory Corporation will be responsible for determining
the Fund's overall investment strategy, including the allocation
of the Fund's assets to be invested in preferred securities, convertible
securities and other debt instruments. NIAC, a registered
investment adviser, is a wholly owned subsidiary of Nuveen Investments,
Inc. The firm and its affiliate companies managed approximately
$80 billion in assets as of January 31, 2003. Nuveen
is the leading sponsor of closed-end exchange-traded funds
as measured by the number of funds (102) and the amount of fund assets
under management (approximately $40 billion) as of January 31,
Spectrum Asset Management Incorporated is a registered investment advisor
with approximately $6.2 billion in assets under management
as of December 31, 2002. Spectrum commenced operations in
1987 and is the largest exclusive manager of preferred securities portfolios.
The firm is an independently managed, wholly-owned subsidiary
of Principal Capital Management which is part of the Principal Financial
Group, a publicly-traded, diversified, insurance
and financial services company. Collectively, subsidiaries
and affiliates of Principal Capital Management manage over $80
billion in assets worldwide.
The Fund's assets allocated to convertible securities are managed by Froley,
Revy. The firm, which has been in business since 1975,
specializes in the management of convertible security portfolios for institutional
investors, including pension funds, insurance companies and
foundations and has assets under management of approximately $2.2
billion. Effective May 17, 2002, Froley Revy began
to operate independently as a wholly owned subsidiary of First
Senior Vice President
Managed Funds Group
Moody's Investors Service
VP - Senior Credit Officer
Managed Funds Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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