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By clicking “I AGREE” [at the end of this document], 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 inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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Rating Action:

Moody's assigns Aa1 ratings to preferred shares issued by two municipal national closed-end funds managed by Nuveen

09 Dec 2013

New York, December 09, 2013 -- Moody's Investors Service, ("Moody's") has assigned Aa1 long-term ratings to Variable Rate MuniFund Term Preferred (VMTP) shares Series 2016 issued by two municipal national closed-end funds managed by Nuveen Fund Advisors, LLC (Nuveen). The two funds are Nuveen Dividend Advantage Municipal Fund (Ticker: NAD) and Nuveen AMT-Free Municipal Income Fund (Ticker: NEA) (collectively, "the Funds"). The long-term ratings of the VMTP shares are based on the funds' adjusted leverage, portfolio profiles and fixed charge coverage, as calculated by Moody's, combined with an assessment of the VMTP shares' relative priority of claim.

In addition, Moody's has affirmed the Aa1 long-term ratings of the existing MuniFund Term Preferred (MTP) shares and Series 2014 VMTP shares issued by the Funds. Moody's has also affirmed the Aa1/P-1 ratings of the existing Variable Rate Demand Preferred (VRDP) shares issued by the Nuveen AMT-Free Municipal Income Fund. The existing MTP and Series 2014 VMTP shares of the Funds will be defeased on December 10, 2013, and will be redeemed by the proceeds of the new Series 2016 VMTP share issuance on the anticipated redemption dates of December 20, 2013 for the MTP shares and January 6, 2014 for the Series 2014 VMTP shares.

The rating actions in respect of the VMTP, MTP and VRDP shares of the two funds are listed below:

Nuveen Dividend Advantage Municipal Fund (Ticker: NAD):

VMTP Series 2016, aggregate liquidation preference $265,000,000, Aa1 assigned

MTP Series 2015, aggregate liquidation preference $144,300,000, Aa1 affirmed

VMTP Series 2014, aggregate liquidation preference $120,400,000, Aa1 affirmed

Nuveen AMT-Free Municipal Income Fund (Ticker: NEA):

VMTP Series 2016, aggregate liquidation preference $151,000,000, Aa1 assigned

MTP Series 2015, aggregate liquidation preference $83,000,000, Aa1 affirmed

VMTP Series 2014, aggregate liquidation preference $67,600,000, Aa1 affirmed

VRDP Series 1, aggregate liquidation preference $219,000,000, Aa1/P-1 affirmed

VRDP Series 2, aggregate liquidation preference $130,900,000, Aa1/P-1 affirmed

RATINGS RATIONALE

The NAD and NEA funds, with managed assets as of October 31, 2013 of about $899.3 million and $1.76 billion, respectively, seek current income exempt from Federal income taxes. The NAD and NEA funds have effective leverage of 37% and 38%, respectively, including tender option bonds.

The long-term ratings assigned to the VMTP shares are based on the following key rating factors:

Adjusted Leverage

Risk-adjusted asset coverage ratios are strong and the risk of an Investment Company of 1940 Act (1940 Act) breach, as calculated by Moody's based on portfolio volatility, is low for each of the funds. For NAD and NEA, asset coverage (using Aaa advance rates) relative to liabilities is 157% and 156% respectively, resulting in a Aaa score for this factor.

Portfolio Profile

The funds' portfolio profiles, which capture the credit quality and liquidity of both fund's holdings, reflect the strong credit quality of municipal holdings among many states that are invested across various general obligations, tax obligations, revenue bonds, pre-refunded bonds as well as other security types. The portfolios of funds NAD and NEA have a weighted average credit quality of A2 and A1, respectively.

Fixed Charge Coverage

The long-term ratings of the VMTP shares of the NAD and NEA funds are further supported by 7.4x and 8.2x fixed charge coverage ratios, respectively, calculated on a trailing one year basis, evidencing the strong capacity on the part of the funds to meet periodic dividend payments from recurring earnings.

Relative Priority of Claim

In addition to assessing the key rating factors described above, Moody's considers the priority of claim of a fund's specific security types and any other qualitative factors relevant to the fund's credit profile. In the case of preferred securities, such as those issued by the Funds, a one-notch downward adjustment from the senior unsecured rating is made to reflect the weaker position of investors holding preferred stock relative to those holding senior unsecured debt obligations.

The methodologies used in these ratings were "Moody's Methodology for Rating Securities Issued by U.S. Closed-End Funds" published in May 2013, and "Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts" published in March 2013. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael C DeCavalcante
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

Yaron Ernst
MD - Managed Investments
Managed Investments Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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 preferred shares issued by two municipal national closed-end funds managed by Nuveen
No Related Data.
© 2021 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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​
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