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Rating Action:

Moody's Assigns Aa1 ratings to Variable Rate MuniFund Term Preferred Shares issued by three Nuveen closed-end funds

01 Nov 2012

New York, November 01, 2012 -- Moody's Investors Service has assigned ratings of Aa1 to $1,182.4 million of Variable Rate MuniFund Term Preferred Shares (VMTP), Series 2015, to be issued in the form of a privately negotiated exchange offer and, with respect to two funds, a private placement under Rule 144A of the Securities Act of 1933. The issuances were effected by three Nuveen New York Stock Exchange listed closed-end funds, including Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc. and Nuveen Quality Municipal Fund, Inc., each investing in portfolios of investment grade municipal bonds. The issuance of Series 2015 VMTP shares will be used to exchange in full equivalent amounts of outstanding VMTP Shares, Series 2014, of each fund, while at the same time upsizing the number of VMTP Shares to be issued by two of the three funds. In the same rating action, Moody's affirmed the Aa1 ratings of the Series 2014 VMTP shares pending their retirement upon exchange for Series 2015 VMTP shares. The Series 2014 ratings will subsequently be withdrawn once the transactions have been finalized.

The funds and applicable Series 2015 VMTP amounts are, as follows:

• Nuveen Premium Income Municipal Fund, Inc. (NYSE: NPI): $407.0 million

• Nuveen Performance Plus Municipal Fund, Inc. (NYSE: NPP): $535.0 million

• Nuveen Quality Municipal Fund, Inc. (NYSE: NQI): $240.4 million

RATING RATIONALE

The VMTP's Aa1 ratings are supported by each of the funds' very strong adjusted leverage and fixed charge coverage ratios. The ratings also reflect the investment grade average weighted credit quality of each of the closed-end funds which range from A1 to A2 based on portfolio data as of September 28, 2012, and the strong asset profiles of each portfolio.

The rating agency added that the Aa1 ratings reflect each fund's strong Moody's risk adjusted asset coverage ratio that incorporates municipal bond advance rates applied to all portfolio assets in each instance, combined with low risk of breaching the coverage ratio imposed by the Investment Company Act of 1940 ('40 Act). Moody's risk adjusted coverage ratios for NQI, NPI and NPP, calculated on a pro-forma basis and applied to portfolio securities, stood at 136%, 137% and 136%, respectively, based on advance rates at the Aaa level. This, combined with a low probability of breaching the each fund's '40 Act regulatory coverage, contributes to the funds' strong adjusted leverage profiles. The leverage profiles are reinforced by each fund's adoption of higher liquidation thresholds and the creation of a structured liquidity facility in the event of a mandatory redemption.

Commenting on the VMTP's priority of claim, Moody's said that the rating also reflects a one-notch downward adjustment from the rating suggested by the key quantitative factors to reflect the weaker position of investors holding preferred stock relative to those holding senior unsecured debt obligations. While each fund's additional leverage through borrowing via the issuance of tender option bonds which serve to subordinate the outstanding VMTP holders, each fund's total leverage remains modest and it is expected that portfolio leverage strategies will constrain effective leverage (VMTP plus tender option bonds (TOBs)) to around 36% to 37.5% of gross assets levels over time.

The Nuveen Quality Municipal Fund, Inc. (NQI), with gross assets of about $940.9 million as of September 28, 2012, seeks current income exempt from regular federal income tax consistent with a secondary investment objective to enhance portfolio value relative to the municipal bond market. The fund's pro-forma leverage will consist of VMTP and TOBs that on a combined basis will represent will consist of 2,404 Series 2015 VMTP shares in the amount of $240.4 million and tender option bonds in the amount of $104.7 million that on a combined basis will represent about the same 37% of gross assets. The Nuveen Premium Income Municipal Fund, Inc. (NPI), with gross assets of about $1.53 billion as of September 28, 2012, seeks a high level of current income exempt from regular federal income tax consistent with the preservation of capital. The fund's pro-forma leverage will consist of 4,070 Series 2015 VMTP shares in the amount of $407 million and TOBs in the amount of $139.8 million that on a combined basis will represent about 35% of gross assets. Lastly, the Nuveen Performance Plus Municipal Fund, Inc. (NPP), with gross assets of about $1.47 billion as of September 28, 2012, also seeks current income exempt from regular federal income tax with a secondary investment objective to enhance portfolio value relative to the municipal bond market. The fund's pro-forma leverage will consist of 5,350 Series 2015 VMTP shares in the amount of $535 million and $53.3 million in TOBs that on a combined basis will represent about 37% of gross assets.

The fund's portfolio profiles, which capture the credit quality and liquidity of the funds' holdings, reflects the relatively high A1 to A2 average credit quality of each fund's assets. Further, each fund is highly diversified both on sector and issuer basis, and the rating benefit from this portfolio structure. The Aa1 ratings of the Series 2015 VMTP shares are further supported by the high quality 9X to 10X fixed charge coverage ratios, calculated on a trailing two year basis, evidencing the funds' strong capacity to meet periodic dividend payments from recurring earnings.

Nuveen Fund Advisors, Inc. is the investment adviser for the funds, responsible for determining each fund's overall investment strategy. Nuveen Investments and its affiliates had approximately $212 billion of assets under management as of June 30, 2012, of which about 41% was in municipal securities.

The principal methodology used in this rating was "Moody's Methodology for Rating Securities Issued by U.S. Closed-End Funds" published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, confidential and proprietary Moody's Analytics' information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

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Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Henry Shilling
Senior Vice President
Managed Investments roup
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Daniel Serrao
Associate Managing Director
Managed Investments Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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 Aa1 ratings to Variable Rate MuniFund Term Preferred Shares issued by three Nuveen closed-end funds
No Related Data.
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