New York, March 22, 2012 -- Moody's Investors Service has assigned ratings of Aaa to approximately
$579 million in Variable Rate Muni Term Preferred Shares (VMTP)
issued pursuant to an offering exempt from registration under the Securities
Act of 1933 by the following four state specific municipal closed-end
funds managed by BlackRock Advisors LLC:
BlackRock California Municipal Income Trust (BFZ) in the amount of $171.3
million
BlackRock New Jersey Municipal Income Trust (BNJ) in the amount of $59.1
million
BlackRock New York Municipal Income Trust (BNY) in the amount of $94.5
million
BlackRock MuniHoldings California Quality Fund, Inc. (MUC)
in the amount of $254.0 million
The net proceeds from the issuance of VMTP, which are subject to
a mandatory term redemption on April 1, 2015 unless extended prior
to maturity with shareholder approval will be used to defease and redeem
in full each fund's outstanding auction rate preferred shares (ARPS) aggregating
approximately $579 million. Pending the redemption following
the required notice period, the Aaa ratings assigned to each fund's
existing ARPS in approximately the same amounts noted above are affirmed.
RATINGS RATIONALE
The ratings reflect the funds' strong capacity to meet their dividend
payment obligations, over-collateralization levels of the
VMTP shares and adherence to conservative asset coverage maintenance provisions.
"In addition to BlackRock's effective portfolio management practices,
each fund has in place deleveraging requirements in the event of asset
coverage ratio breaches," said Moody's analyst Deven Kapoor.
Each fund invests in municipal securities and other related investments,
the income of which is primarily exempt from regular income taxes at the
federal and the state level. The aggregate assets managed by these
funds were $2.4 billion as of February 21 2011.
Once issued, the leverage of each fund is expected to remain unchanged
and within the range consistent with the assigned ratings. On a
pro-forma basis, leverage for the four funds is between 37%
and 41%, when Tender Option Bonds (TOBs) are included (proforma
leverage is between 21% and 31% when TOBs are excluded).
The VMTP shares issued by the funds pay dividends at a variable rate with
a spread linked to SIFMA. The funds are required to adhere to (i)
Moody's coverage guidelines and (ii) maintain an effective leverage ratio
of less than 45% and asset coverage of at least 225% pursuant
to the VMTP shares issuance document. Failure to maintain any of
these guidelines triggers mandatory redemption provisions and a 200 basis
point over the then current dividend rate.
To mitigate the risk of a shortfall at maturity, the funds are required
to segregate securities starting six months prior to redemption,
with a value equal to at least 110% of the redemption amounts.
Each fund's coverage ratios are in excess of the Moody's asset coverage
ratio of 100% and the regulatory coverage ratio of 200%
under the Investment Company Act of 1940.
At the time of the VMTP issuance, asset coverage levels for the
funds on a pro-forma basis are as follows:
Fund, Moody's BMA Coverage, 1940 Act Asset Coverage
BFZ, 151, 392
BNJ, 151, 302
BNY, 153, 303
MUC, 142, 355
BlackRock Advisors, LLC, is the investment adviser for the
funds, responsible for determining the fund's overall investment
strategy. BlackRock had approximately $3.513 trillion
of assets under management as of December 31, 2011, of which
approximately $23.656 billion was invested in municipal
closed-end funds.
Moody's uses a market value type approach to rate the obligations issued
by closed-end funds. Under this form of analysis,
a fund's assets serve as collateral and provide an asset coverage cushion
that protects investors against a sudden and severe decline in the value
of the portfolio assets for a given exposure period and target rating
level. The asset coverage cushion accounts for the sum of a fund's
liabilities, including the face amount of preferred stock outstanding
or other debt instruments, accumulated and projected interest,
dividend payments and certain fund expenses that must be fully covered
by the discounted value of eligible securities. In addition,
the analysis extends to the fund's intrinsic ability to generate income
to cover dividend payments.
Other inputs in the determination of the rating are: a) a quantitative
assessment of total leverage, the fund's capital structure,
amount and nature of the collateral, including credit quality of
investments, diversification guidelines, and exposure period,
and b) our qualitative assessment of the various funds' structural and
organizational considerations, governing documents combined with
requirements to perform in accordance with such documents, and monitoring
practices, portfolio management, and other relevant investment
policies.
Moody's noted that on November 8, 2011, it released a Request
for Comment, in which the rating agency has requested market feedback
on a proposed methodology that would change its approach for rating securities
issued by closed-end funds. If the proposed methodology
is implemented, the ratings on the VMTP shares may be affected.
Please refer to Moody's Request for Comment, titled "Moody's Proposes
New Methodology for Rating Securities Issued by Closed-End Funds,"
for further details regarding the implications of the proposed methodology
on Moody's ratings.
REGULATORY DISCLOSURES
Although these credit ratings have been issued in a non-EU country
which has not been recognized as endorsable at this date, the credit
ratings are deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. 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 each of the ratings are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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.
Deven Kapoor
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
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 Aaa Ratings to Variable Rate Muni Term Preferred Shares Issued by Four BlackRock Registered Closed-End Funds
