New York, November 16, 2016 -- Moody's Investors Service ("Moody's") has today
upgraded to Aa3 from A1 the Auction Rate Preferred (ARP) shares issued
by the Eaton Vance Limited Duration Income Fund (Ticker: EVV).
The following is a list of the rating actions related to EVV:
- Series A ARPS, aggregate liquidation preference of $53.3
million (2,133 shares, liquidation preference of $25,000
per share) -- upgraded to Aa3 from A1
- Series B ARPS, aggregate liquidation preference of $53.3
million (2,133 shares, liquidation preference of $25,000
per share) -- upgraded to Aa3 from A1
- Series C ARPS, aggregate liquidation preference of $53.3
million (2,133 shares, liquidation preference of $25,000
per share) -- upgraded to Aa3 from A1
- Series D ARPS, aggregate liquidation preference of $53.3
million (2,133 shares, liquidation preference of $25,000
per share) -- upgraded to Aa3 from A1
- Series E ARPS, aggregate liquidation preference of $53.3
million (2,133 shares, liquidation preference of $25,000
per share) -- upgraded to Aa3 from A1
RATINGS RATIONALE
The upgrade of the ARP shares to Aa3 from A1 reflects the stronger asset
quality of EVV's investment portfolio relative to other bank loan
and high yield funds supported by the fund's meaningful and consistent
allocation to high quality US government and agency MBS. The upgrade
is further supported by the portfolio's low duration, which
at less than 3 years, should make the market value of the fund's
investment portfolio more resilient to a change in the direction of US
monetary policy.
Adjusted Leverage
EVV's risk adjusted asset coverage ratio, at 130%,
is consistent with a Aaa factor score, reflecting the fund's
leverage and asset profile. The risk of an Investment Company of
1940 Act (1940 Act) breach is low at 8.3 times, as calculated
by Moody's based on the portfolio's historical volatility and leverage.
The results are consistent with a score of Aaa for this factor.
Portfolio Profile
EVV's asset profile, which captures Moody's assessment of
the credit quality and liquidity of the fund's investment portfolio,
reflects the low average credit quality of the fund's assets,
consisting primarily of bank loans and high-yield bonds,
as well as the lower liquidity characteristics of such securities.
This is weakness is partially offset by the portfolio's allocation
to high quality US government and agency mortgage-backed securities
which enhance its overall credit quality and liquidity profile relative
to funds invested exclusively in banks loans and/or high yield bonds.
Fixed Charge Coverage
The Aa3 ratings of the ARP shares are further supported by the consistently
strong coverage of the fund's fixed charges This demonstrates strong
capacity on the part of EVV to meet periodic dividend payments from recurring
earnings and is consistent with a Aaa score for this key scorecard factor.
We also note that interest rate risk is mitigated by the short duration
of the portfolio and the floating rate nature of the bank loan investments.
Relative Priority of Claim
The Aa3 ratings reflect a one-notch downward adjustment to reflect
the weaker position of investors holding preferred stock relative to senior
unsecured debt obligations and an additional one notch differential to
reflect the fund's substantial senior leverage from consistent borrowings
under its million revolving bank credit facility that, in Moody's
view, serves to subordinate the standing of ARPS holders.
Eaton Vance Management is the investment adviser for EVV, responsible
for determining its overall investment strategy.
The principal methodology used in these ratings was "Securities
Issued by U.S. Closed-End Funds" published
in March 2015. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Dean Ungar
Vice President - Senior 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
Marc R. Pinto, CFA
MD - Financial Institutions
Managed Investments Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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