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By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..

 

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Rating Action:

Moody's Assigns Aaa ratings to Variable Rate MuniFund Term Preferred Shares issued by three Nuveen Funds

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.

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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.

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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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​
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