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23 Feb 2011
New York, February 23, 2011 -- Moody's Investors Service has assigned ratings of Aaa to $1,064.5
million in Variable Rate MuniFund Term Preferred Shares Series 2014 (VMTP)
to be issued by three Nuveen national municipal closed-end funds.
The VMTP shares, which are subject to a term redemption on March
1, 2014, are being issued in a private placement under Rule
144A of the Securities Act of 1933, in the amounts indicated by
the following funds:
• Nuveen Premium Income Municipal Fund, Inc. (NYSE:
NPI): $402.4 million
• Nuveen Performance Plus Municipal Fund, Inc. (NYSE:
NPP): $421.7 million
• Nuveen Insured Quality Municipal Fund, Inc. (NYSE:
NQI): $240.4 million
RATINGS RATIONALE
The ratings reflect the funds' strong capacity to meet their dividend
payment obligations, over-collateralization levels of their
preferred shares and adherence to conservative asset coverage maintenance
provisions. "In addition to Nuveen's effective portfolio
management practices, it has in place deleveraging procedures in
the event of coverage ratio breaches," said Moody's Senior Vice
President Henry Shilling.
Nuveen Premium Income Municipal Fund, Inc., Nuveen
Performance Plus Municipal Fund, Inc. and Nuveen Insured
Quality Municipal Fund, Inc., with total net assets
of $1,405.3 million, $1,298.2
million and $840.95 million, respectively, invest,
under normal circumstances, in municipal securities and other related
investments the income of which is exempt from regular federal income
taxes. The three funds will use the net proceeds from the sales
of VMTP shares to refinance and entirely redeem each fund's outstanding
Municipal Auction Rate Cumulative Preferred shares (MuniPreferred shares).
Once issued, leverage is expected to remain unchanged and inside
the range consistent with Moody's Aaa ratings for national municipal bond
funds. Including exposure to tender option bonds, calculated
on a pro-forma basis, leverage is projected at about 42%
for NPI, 39% for NPP and 42% for NQI. On the
same pro-forma basis, but excluding tender option bonds,
leverage is projected to be approximately 29% for NPI, 33%
for NPP and 29% for NQI.
The VMTP shares issued by the funds, which pay dividends at a rate
that is reset weekly at a spread to SIFMA, are subject to a term
redemption on March 1, 2014. Further, there are mandatory
redemption provisions that are triggered if the funds fail to maintain
an asset coverage ratios of 225% as defined in the terms of the
VMTP shares (which is more conservative than the 200% asset coverage
ratio pursuant to the Investment Company Act of 1940) or an effective
leverage ratio of 45% as defined in the terms of the VMTP shares,
such effective leverage ratio includes preferred shares and tender option
bonds. This is in addition to the Moody's coverage ratio and guidelines
that are also applicable.
To mitigate the risk of a short-falls, the fund is also required
to segregate securities starting five months prior to redemption,
with a value equal to at least 110% of the redemption amount.
On a pro-forma basis, NPI, NPP and NQI funds are projected
to achieve a Moody's coverage ratio of 137%, 151%
and 135%, respectively, based on factors consistent
with a rating of Aaa. These are well in excess of Moody's 100%
coverage ratio applicable to these funds.
In addition, the ratings on the outstanding MuniPreferred shares
issued by each of the funds were affirmed. These consist of 16,026
MuniPreferred shares in the amount of $400.65 million for
NPI, 16,796 MuniPreferred shares for a combined amount of
$419.9 million, and 9,568 MuniPreferred shares
in the combined amount of $239.2 million. They will
be defeased by the proceeds from the VMTP shares and then redeemed after
a required 30-day notice period has elapsed.
The most recent rating action affecting obligations issued by the funds
occurred at the time of the original ratings assigned to the MuniPreferred
shares between 1988 and 1980.
Nuveen Fund Advisors, Inc. is the funds' investment adviser,
responsible for determining the funds' overall investment strategy.
Nuveen Investments and its affiliates had approximately $197 billion
of assets under management as of December 31, 2010, of which
over a third was in municipal securities.
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 and
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) 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 such documents, and monitoring
practices, portfolio management, and other relevant investment
policies.
REGULATORY DISCLOSURES
Information sources used to prepare the credit 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Henry Shilling
Senior Vice President
Managed Investments Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Daniel Serrao
Senior Vice President
Managed Investments Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
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 MuniFund Term Preferred Shares issued by three Nuveen Funds
No Related Data.
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Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.” Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. 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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
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