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12 Jan 2011
New York, January 12, 2011 -- Moody's Investors Service has assigned ratings of Aaa to approximately
$35 million in MuniFund Term Preferred Shares Series 2016 (MTP)
to be issued by two state-specific Nuveen municipal closed-end
funds. The MTP shares, which are subject to a term redemption
in 5 years from the date of issue, beginning on or about February
1, 2016, are being issued in the amount indicated by the following
Nuveen Maryland Dividend Advantage Municipal Fund 3 (NYSE:
NWI Pr D): $17,670,900
Nuveen Massachusetts Premium Income Municipal Fund (NYSE:
NMT Pr D): $17,175,250
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
Nuveen Maryland Dividend Advantage Municipal Fund 3 (NWI) and Nuveen Massachusetts
Premium Income Municipal Fund (NMT), with total net assets of about
$115 million and $104 million, respectively,
invest, under normal circumstances, at least 80% of
their managed assets in municipal securities and other related investments
the income of which is exempt from regular federal as well as Maryland
and Massachusetts income taxes, respectively. The two funds
intend to use the net proceeds from the sales of MTP shares to refinance
and entirely redeem each fund's outstanding Municipal Auction Rate
Cumulative Preferred shares (MuniPreferred shares).
Once issued, including over-allotments, leverage is
expected to increase by a modest 1%-2% and remain
well within the range consistent with Moody's Aaa ratings assigned
to leverage issued by state-specific municipal bond funds.
Including exposure to tender option bonds as well as previously issued
MTP shares, leverage, calculated on a pro-forma basis,
is projected at about 37% for NWI and 39% for NMT.
On the same pro-forma basis, but excluding tender option
bonds, leverage is projected to be approximately 33% and
35% for NWI and NMT.
The MTP shares issued by the funds are subject to a term redemption in
five years, on or about February 1, 2016. Further,
there are mandatory redemption provisions that are triggered if the funds
fail to maintain and cure asset coverage ratios of 225%,
as defined in each fund's prospectus, or effective leverage
ratio, including preferred shares and tender option bonds,
of 50%--a coverage ratio that is more conservative
than the 200% coverage ratio pursuant to the Investment Company
Act of 1940. This is in addition to the Moody's coverage
ratio and guidelines that are also applicable.
On a pro-forma basis, the NWI and NMT funds are projected
to achieve a Moody's coverage ratio of 153% and 135%,
respectively, based on factors consistent with a rating of Aaa.
This is 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 593
MuniPreferred Series T shares in the amount of $14.8 million
for NWI and 576 MuniPreferred Series TH shares in the amount of $14.4
million. They will be defeased by the proceeds from the MTP shares
and then redeemed after a required 30-day notice period has elapsed.
We are also affirming the Aaa ratings assigned to MTP shares previously
issued by each of the two funds. Issued as of February 3,
2010 and January 4, 2010, respectively, these include
$20.7 million in MuniFund Term Preferred shares issued by
NWI and $20.1 million MuniFund Term Preferred shares issued
by NMT. They were issued to partially refinance and redeem outstanding
The most recent rating actions affecting obligations issued by the funds
occurred on February 3, 2010 and January 4, 2010 at the time
of the last MuniPreferred share issuances by NWI and NMT, respectively.
Nuveen Asset Management is the funds' investment adviser, responsible
for determining the funds' overall investment strategy. Nuveen
Investments and its affiliates had approximately $163 billion of
assets under management as of September 30, 2010, of which
approximately $76.5 billion 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
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
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.
Senior Vice President
Managed Investments Group
Moody's Investors Service
Senior Vice President
Managed Investments Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns ratings of Aaa to MuniFund Term Preferred Shares issued by Nuveen Maryland and Massachusetts funds
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