New York, August 31, 2011 -- Moody's Investors Service has assigned ratings of Aaa to approximately
$312 million in Variable Rate MuniFund Term Preferred Shares (VMTP)
Series 2014 to be issued by Nuveen Dividend Advantage Municipal Fund 3
(NYSE: NZF), Nuveen Insured Dividend Advantage Municipal Fund
(NYSE: NVG), and Nuveen Insured New York Premium Income Fund
(NYSE: NNF) under Rule 144A of the Securities Act of 1933.
NZF and NVG are two national closed-end funds while NNF is specific
to New York State. The proceeds from the VMTP share issuances,
which are subject to a term redemption on October 1, 2014,
will be used to redeem each fund's outstanding Municipal Auction
Rate Preferred Shares (ARPS).
Nuveen Dividend Advantage Municipal Fund 3
US$169.2 million in the aggregate liquidation preference
of VMTP Shares, Series 2014, Assigned Aaa
Nuveen Insured Dividend Advantage Municipal Fund
US$92.5 million in the aggregate liquidation preference
of VMTP Shares, Series 2014, Assigned Aaa
Nuveen Insured New York Premium Income Municipal Fund, Inc.
US$50.7 million in the aggregate liquidation preference
of VMTP Shares, Series 2014, Assigned Aaa
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 requirements in the event
of coverage ratio breaches," said Moody's Senior Vice President
Henry Shilling.
NZF, with total net assets of about $805.2 million,
NVG, with total net assets of about $650.5 million,
and NNF, with total net assets of about $178.5 million,
invest in municipal securities and other related investments the income
of which is exempt from regular federal income taxes and, in the
case of NNF, also New York State and New York City income taxes.
The funds will use the net proceeds from the sale of VMTP shares to refinance
and entirely redeem their outstanding Auction Rate Preferred Shares.
Once issued, the leverage of each fund is expected to remain unchanged
and inside the range consistent with Moody's Aaa ratings assigned to similar
instruments issued by municipal closed- end funds. On a
pro-forma basis, leverage for NZF, NVG and NNF is projected
at about 39%, 38% and 37%, respectively,
when exposure to tender option bonds are included. On the same
pro-forma basis, but excluding tender option bonds,
leverage for NZF, NVG and NNF is projected to be approximately 27%,
28% and 26%, respectively.
The VMTP shares issued by the funds, which pay dividends at a variable
rate linked to SIFMA, are subject to a term redemption on October
1, 2014. Further, there are mandatory redemption provisions
that are triggered if the funds fail to maintain an asset coverage ratio
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 and including 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-fall at maturity, the funds
are also required to segregate securities starting five months prior to
redemption, with a value equal to at least 110% of the redemption
amounts.
On a pro-forma basis, NZF, NVG and NNF are projected
to achieve a Moody's coverage ratio of 150%, 148%
and 134%, respectively, based on factors consistent
with a rating of Aaa. This is well in excess of Moody's 100%
coverage ratio applicable to these funds.
In addition, the ratings on the outstanding MuniFund Term Preferred
(MTP) Shares previously issued by two of the funds were affirmed.
These consist of 7.0 million MTP Shares in the amount of $70
million issued by NZF and 10.8 million MTP Shares in the amount
of $108 million issued by NVG. These were issued by NZF
and NVG in December 2010 and October 2009, respectively, to
partially redeem ARPS, and are subject to a mandatory redemption
on January 1, 2016 and November 1, 2014, respectively.
Leverage and Moody's coverage ratios include these outstanding transactions
which rank on a parity as to dividends and liquidation rights with the
newly issued VMTP.
Also, the ratings on the outstanding ARPS issued by the funds were
affirmed. These consist of 6,736 ARPS in the amount of about
$168.4 million issued by NZF, 3,678 ARPS in
the amount of about $92 million issued by NVG and 2,014 ARPS
in the amount of about $50.4 million issued by NNF.
They will be defeased by the proceeds from the VMTP shares and then redeemed
within the required notification period, starting as soon as 20
days.
With regard to NZF and NVG, the most recent rating action affecting
obligations issued by the funds occurred as of December 15, 2010
and October 15, 2009, respectively, upon the issuance
of MTP shares. The most recent rating action occurred on or about
2002 for NNF at the time of the original ARPS rating assignments.
Nuveen Fund Advisors, Inc. is the funds' investment adviser,
responsible for determining the funds' overall investment strategy.
Nuveen Investments and its affiliates had approximately $212 billion
of assets under management as of April 30, 2011, 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 with such documents, and monitoring
practices, portfolio management, and other relevant investment
policies.
REGULATORY DISCLOSURES
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
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a 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 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
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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.
New York
Henry Shilling
Senior Vice President
Managed Investments Group
Moody's Investors Service, Inc.
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New York
Daniel Serrao
Senior Vice President
Managed Investments Group
Moody's Investors Service, Inc.
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SUBSCRIBERS: 212-553-1653
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Moody's assigns Aaa ratings to Variable MuniFund Term Preferred Shares issued by three Nuveen closed-end funds
