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05 Apr 2010
New York, April 05, 2010 -- Moody's Investors Service has assigned first-time ratings of Aaa
to MuniFund Term Preferred Shares ("MTP") to be issued by the following
two Nuveen Maryland municipal closed-end funds:
o Nuveen Maryland Dividend Advantage Municipal Fund (NFM: NYSE Amex)
o Nuveen Maryland Dividend Advantage Municipal Fund 2(NZR: NYSE
Amex) $27.3 Mil.
For each of the funds Moody's expects total issue size to increase to
$30.457 and $31.395 million respectively in
connection with a share overallotment option permitting underwriters to
increase the total issue size from the initial amounts. Moody's
ratings anticipate that each fund's total leverage at the time of issuance,
assuming full exercise of the underwriter's overallotment option,
will increase modestly from current level of approximately 30%
to 35% of managed assets as a result. Dividends on the MTP
Shares will be cumulative, fixed and payable on a monthly basis.
At the time of issuance, asset coverage is expected to be approximately
300% for each fund expressed as the ratio of managed assets to
senior securities and Moody's asset coverage computation: 1.69
and 1.65x its 1.0 rating coverage threshold for NFM and
NZR respectively. "Moody's rating of the MTP shares reflects our
view that the funds will exhibit strong asset coverage levels and high
credit quality going forward because we expect the sponsor to adhere to
conservative asset maintenance practices as well as deleveraging procedures,"
said Moody's Vice President Martin Duffy.
The MTP shares are subject to a term redemption in five years, on
or about May 1, 2015, but may be optionally redeemed on or
after May 1, 2011. In addition, there are mandatory
redemption provisions that are triggered if the fund fails to maintain
and cure an asset coverage ratio of 225%, or an effective
coverage ratio, including preferred shares and tender option bonds,
Once issued, proceeds from the MTP Shares will be used to redeem
all of the MuniPreferred Shares issued and outstanding by each of the
funds. This will be achieved by segregating sufficient cash plus
dividends payable to redemptions for distribution to registered owners
following the requisite notification period. The ratings of Aaa
on the existing MuniPreferred shares of NFM and NZR are affirmed.
Each fund seeks current income exempt from Federal and as well as state
taxes in Maryland by investing predominantly in Maryland state and local
investment grade municipal bonds. Moody's presently rates
the State of Maryland's General Obligation debt Aaa. Nuveen
Asset Management is the fund's investment adviser, responsible for
determining the fund's overall investment strategy. Nuveen Investments
and its affiliates had approximately $145 billion of assets under
management as of December 31, 2009, of which approximately
$68.8 billion was in municipal securities.
Moody's ratings of preferred shares address the full, liquidation-preference
amount payable upon optional, mandatory, or term redemption,
including the distribution of fund assets upon liquidation. The
rating approach uses asset-specific advance rates over a predetermined
short-time horizon to calculate the market value risk of the fund's
investment portfolio as a whole for structures with triggers that cause
partial or full liquidation of the investment pool.
The credit ratings assigned to preferred stock issued by these funds were
evaluated using factors we believe to be relevant to the credit profile
of each issuer, such as the objectives of the fund, its strategies
for achieving its objectives, and the management characteristics
of its sponsor. These attributes are compared against those of
other funds and these ratings are believed to be comparable to ratings
assigned to preferred stock issued by closed end funds of similar risk.
The assigned ratings are opinions on the expected losses associated with
each security if the fund were to be liquidated in a stress scenario.
The ratings also address the likelihood of timely payment of dividends
as well as principal upon term redemptions. In the rating assigned
to MTP shares, Moody's would view an extension of the mandatory
term redemption date as a breach of offering terms having negative implications
for the rating.
Prior to MTP issuance, NFM and NZR had MuniPreferred outstanding
of $25.83 and $26.63 mil. The most
recent rating actions affecting leverage issued by the two funds were
initial rating assignments of Aaa applicable to preferred shares issued
by NFM on March 19, 2001 and NZR on Nov. 21, 2001
VP - Senior Credit Officer
Global Managed Investments Group
Moody's Investors Service
Moody's assigns Aaa ratings to Nuveen's MD MuniFund Term Preferred Shares
Senior Vice President
Global Managed Investments Group
Moody's Investors Service
No Related Data.
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