$365.2 million of VRDP shares affected
New York, November 29, 2012 -- Moody's Investors Service has upgraded to P-1 from P-2 the
short-term ratings of Variable Rate Demand Preferred (VRDP) shares
issued by three national and four state-specific closed-end
funds managed by BlackRock Advisors, LLC, in connection with
the replacement of their Liquidity Provider. Barclays Bank PLC,
rated P-1/A-2, stable, will enter into VRDP
Purchase Agreements to provide liquidity support to the VRDP shares,
replacing Morgan Stanley Bank (P-2/A-3, stable),
effective November 29, 2012. The VRDP shares' short-term
ratings are based on the strength of the liquidity support provided by
the VRDP Liquidity Provider. Moody's also affirmed the long-term
ratings of the VRDP shares, which remain at Aa1 and Aa2 for the
national and state-specific funds respectively. The long-term
ratings are based on each fund's risk adjusted leverage, portfolio
profile and fixed charge coverage, combined with an assessment of
the VRDP shares' relative priority of claim.
The seven funds, each managed by BlackRock Advisors, LLC,
and the corresponding VRDP shares are listed below:
National Municipal Funds:
• BlackRock Municipal Bond Investment Trust (BIE) 178 shares @$100,000
per share for $17.8 million Variable Rate Demand Preferred
Shares Series W-7 (VRDP) mandatory redemption 10/1/2041/Barclays
Bank PLC backed liquidity, Upgraded P-1/Affirmed Aa1
• BlackRock Municipal Income Investment Trust (BBF) 342 shares @$100,000
per share for $34.2 million Variable Rate Demand Preferred
Shares Series W-7 (VRDP) mandatory redemption 10/1/2041/Barclays
Bank PLC backed liquidity, Upgraded P-1/Affirmed Aa1
• BlackRock Muniyield Quality Fund, Inc. (MQY) 1,766
shares @$100,000 for $176.6 million Variable
Rate Demand Preferred Shares Series W-7 (VRDP) mandatory redemption
10/1/2041/Barclays Bank PLC backed liquidity, Upgraded P-1/Affirmed
Aa1
State-Specific Municipal Funds:
• BlackRock Muni New York Intermediate Duration Fund, Inc.
(MNE) 296 shares @$100,000 per share for $29.6
million Variable Rate Demand Preferred Shares Series W-7 (VRDP)
mandatory redemption 10/1/2041/Barclays Bank PLC backed liquidity,
Upgraded P-1/Affirmed Aa2
• BlackRock New York Municipal Bond Trust (BQH) 221 shares @$100,000
for $22.1 million Variable Rate Demand Preferred Shares
Series W-7 (VRDP) mandatory redemption 10/1/2041/Barclays Bank
PLC backed liquidity, Upgraded P-1/Affirmed Aa2
• BlackRock New York Municipal Income Quality Trust (BSE) 405 shares
@$100,000 for $40.5 million Variable Rate Demand
Preferred Shares Series W-7 (VRDP) mandatory redemption 10/1/2041/Barclays
Bank PLC backed liquidity, Upgraded P-1/Affirmed Aa2
• BlackRock New York Municipal Income Trust II (BFY) 444 shares @$100,000
for $44.4 million Variable Rate Demand Preferred Shares
Series W-7 (VRDP) mandatory redemption 10/1/2041/Barclays Bank
PLC backed liquidity, Upgraded P-1/Affirmed Aa2
RATINGS RATIONALE
Short-Term Ratings
Summary
The short-term ratings are based upon the terms of the VRDP Shares
Purchase Agreements entered into by Barclays Bank PLC, as Liquidity
Provider, and The Bank of New York Mellon, as Tender and Paying
Agent, which supports VRDP holders' ability to tender their
shares with an unconditional commitment from Barclays to purchase unsuccessfully
remarketed shares as the Liquidity Provider.
Credit Discussion
The Liquidity Provider agrees to purchase any rated shares that have been
tendered for and not successfully remarketed on the 7th day after notice
of tender. The VRDP Purchase Agreements have no automatic termination
events or conditions precedent to funding, making it an unconditional
agreement to purchase un-remarketed shares. The Prime-1
rating will expire upon the termination of the VRDP Purchase Agreements
which are scheduled to terminate as of December 4, 2014, although
the funds may request, not more than one hundred twenty (120) days
nor less than ninety (90) days prior to this date that the Liquidity Provider
extend the term of its VRDP Purchase Agreement for an additional period
of up to 364 days, or longer if mutually agreed.
VRDP shareholders have the option to tender their VRDP shares for remarketing
and purchase seven business days after providing notice to the tender
and paying agent. If the remarketing agent is unable to sell any
or all of the tendered shares submitted by VRDP shareholders pursuant
to either a mandatory tender event or an optional tender, the tender
and paying agent will deliver all unsold VRDP shares to the Liquidity
Provider for purchase on such purchase date.
In addition to optional tenders, the VRDP Purchase Agreements include
mandatory purchase events to address "roll over" risk and any unscheduled
termination of the VRDP Purchase Agreements. Additionally,
VRDP shares are subject to mandatory tender for remarketing upon the occurrence
of mandatory tender events, which include: (a) failure of
the fund to pay scheduled dividends; (b) downgrade of the Liquidity
Provider rating to a certain level; (c) failure of the fund to remit
fees to the Liquidity Provider for services rendered (if declared a mandatory
tender event by the Liquidity Provider); (d) occurrence of an extraordinary
corporate event; (e) substitution of the Liquidity Provider;
(f) designation of a special rate period, and (g) breach of an effective
leverage covenant continued for 60-days (if declared a mandatory
tender event by the Liquidity Provider).
The Liquidity Provider has a mandatory purchase obligation with respect
to all outstanding VRDP shares upon termination of a VRDP Purchase Agreement
and to the extent that an alternate VRDP Purchase Agreement is not put
in place. The occurrence of any mandatory purchase events would
begin a process whereby all VRDP shareholders would be notified of a mandatory
purchase event and their VRDP shares subject to purchase by the Liquidity
Provider.
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.
Long-Term Ratings Credit Discussion
National Municipal Funds
BIE, BBF, and MQY, with gross assets of $92.7
million, $174.6 million, and $811.0
million, respectively as of October 31, 2012, are modestly
levered with effective leverage of 39%, 39%,
and 36%, respectively, including tender option bonds.
The Aa1 ratings are based on each of the funds' strong coverage
ratios, using municipal advance rates applied to all portfolio assets,
combined with low risk of breaching the coverage ratio imposed by the
Investment Company Act of 1940 (40 Act). Moody's risk adjusted
coverage ratios, based on advance rates applied to portfolio securities
including tender option bonds, stood at 163%, 163%,
and 174% for BIE, BBF, and MQY, respectively
of the Aaa standard for this metric. This, combined with
the low probability of breaching the funds' 40 Act regulatory coverage,
contributes to the funds' strong adjusted leverage profile.
The leverage profile is reinforced by each fund's commitment to
maintain an effective leverage ratio at or below 45%.
The funds' portfolio profiles, which capture the credit quality
and liquidity of the funds' holdings, reflects the strong
credit quality of each fund's municipal holdings, that are
well diversified nationally, across various general obligation,
tax obligation, revenue bonds, pre-refunded bonds,
as well as other security types. The long-term ratings of
the national municipal fund VRDP shares are further supported by very
high quality 10 times-to-11 times fixed charge coverage
ratios, calculated on a trailing one year basis, and 9 times-to-11
times fixed charge coverage ratios, calculated on a trailing five
year basis, evidencing the funds' excellent capacity to meet
periodic dividend payments and recurring earnings.
The ratings also reflect a one notch downward adjustment to reflect the
weaker position of investors holding preferred stock relative to senior
unsecured debt obligations.
New York State-Specific Municipal Funds
MNE, BQH, BSE, and BFY with assets of $101.7
million, $75.4 million, $161.1
million and $127.7 million respectively, as of October
31, 2012, are modestly levered effective leverage of 35%,
39%, 38%, and 35%, respectively,
including tender option bonds.
The Aa2 ratings are based on each of the funds' strong coverage
ratios, using municipal advance rates applied to all portfolio assets,
combined with low risk of breaching the coverage ratio imposed by the40
Act, as well as the State of New York's (Aa2, Stable)
rating. Moody's risk adjusted coverage ratios, based
on advance rates applied to portfolio securities including tender option
bonds, stood at 168%, 152%, 158%,
and 165% for MNE, BQH, BSE, and BFY, respectively
of the Aaa standard for this metric. This, combined with
the low probability of breaching the funds' 40 Act regulatory coverage,
contributes to the funds' strong adjusted leverage profile.
The leverage profile is reinforced by the fund's commitment to maintain
a leverage ratio at or below 45%, lower than the 40 Act limit
of 50%.
The funds' portfolio profiles, which capture the credit quality
and liquidity of the funds' holdings, reflects the strong
credit quality of each fund's municipal holdings, that are
well diversified nationally, across various general obligation,
tax obligation, revenue bonds, pre-refunded bonds,
as well as other security types. This is offset by lower liquidity
metrics, due to the funds' single-state focus and industry
and sector concentrations, which could be exacerbated in any future
municipal market downturn.
The long-term ratings of the national municipal fund VRDP shares
are further supported by high quality 5 times-to-6 times
fixed charge coverage ratios, calculated on a trailing one year
basis, and 5 times-to-10 times fixed charge coverage
ratios, calculated on a trailing five year basis, evidencing
the funds' strong capacity to meet periodic dividend payments and
recurring earnings.
The ratings also reflect a one notch downward adjustment to reflect the
weaker position of investors holding preferred stock relative to senior
unsecured debt obligations.
The principal methodology used in this rating was "Moody's Methodology
for Rating Securities Issued by U.S. Closed-End Funds"
published in May 2012. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
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 the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
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Service information, and confidential and proprietary Moody's
Analytics information.
Moody's considers the quality of information available on the rated
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a rating.
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Please see the ratings disclosure page on www.moodys.com
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for information on (A) MCO's major shareholders (above 5%) and
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Neal M Epstein
VP - Senior Credit Officer
Financial Institutions 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
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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Moody's upgrades short-term ratings to P-1 for VRDP shares issued by seven BlackRock municipal closed-end funds
