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Fitch Rates VRTP Shares Issued by 3 Nuveen Loan Funds

12/30/2013 | 06:00pm US/Eastern

Fitch Ratings assigns long-term ratings as noted below to variable rate term preferred shares (VRTP shares) issued by three Nuveen loan closed-end funds managed by Nuveen Fund Advisors, LLC (NFA) and subadvised by Symphony Asset Management, LLC (Symphony).

The rating actions are as follows:

Nuveen Floating Rate Income Opportunity Fund (JRO):

--$98,000,000 of VRTP shares, final mandatory redemption date Feb. 1, 2017, rated 'AA'.

Nuveen Floating Rate Income Fund (JFR)

--$139,000,000 of VRTP shares, final mandatory redemption date Feb. 1, 2017, rated 'AA'.

Nuveen Senior Income Fund (NSL)

--$58,000,000 of VRTP shares, final mandatory redemption date Feb. 1, 2017, rated 'AA'.

The three funds will use the proceeds of the VRTP issuances to partially refinance the funds' outstanding credit facilities, as well as to increase the funds' leverage.

KEY RATING DRIVERS

The 'AA' long-term ratings primarily reflect:

--Sufficient asset coverage provided to the VRTP shares as calculated per the funds' over-collateralization (OC) tests;

--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;

--The legal and regulatory parameters that govern the funds' operations;

--The capabilities of NFA as investment advisor and Symphony as subadvisor.

ASSET COVERAGE

The funds' asset coverage ratios for the VRTP shares, as calculated in accordance with the Investment Company Act of 1940, were in excess of the minimum asset coverage threshold of 225% currently set by the terms of the governing documents for the VRTP.

The funds' Effective Leverage Ratios are below the maximum 45% (or 46% if the increase in the ratio is due exclusively to asset market value volatility) threshold set by the terms of the governing documents for the VRTP.

In the event of asset coverage declines, the funds' governing documents will require the funds to reduce leverage in order to restore compliance with the asset coverage test breaching the required threshold.

STRESS TESTS

Fitch performed various stress tests on the funds to assess the strength of the structural protections available to the VRTP shares compared to the stresses outlined in Fitch's closed-end fund rating criteria. These tests included determining various adverse scenarios where the funds' leverage and portfolio composition migrated to the outer limits of the funds' operating and investment guidelines.

Only under remote circumstances, such as severe credit deterioration or increased issuer concentration, did the asset coverage available to the VRTP Shares fall below the 'AA' threshold, and instead passed at a 'A' rating level.

Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views the funds' permitted investments, issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AA' rating.

THE FUNDS

The funds are closed-end management investment companies regulated by the Investment Company Act of 1940. The funds currently invest primarily in non-investment grade senior loans.

NFA, a subsidiary of Nuveen Investments, is the funds' investment advisor, responsible for the funds' overall investment strategies and their implementation. Symphony is a subsidiary of NFA and oversees the day-to-day operations of the funds. Nuveen Investments and its affiliates had approximately $215 billion of assets under management as of Sept. 30, 2013.

RATINGS SENSITIVITY

The ratings assigned to the VRTP shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the funds, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.

The funds have the ability to assume economic leverage through derivative transactions which may not be captured by the funds' OC tests. The funds do not currently engage in speculative derivative activities and do not envision engaging in material amounts of such activity in the future. Material speculative derivative exposures in the future could have potential negative rating implications if it adversely affects asset coverage available to rated VRTP shares.

For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

The sources of information used to assess this rating were the public domain and Nuveen Fund Advisors.

Opt-in to receive Fitch's forthcoming research on closed-end funds:

http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/

Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013);

--'MLP Closed-End Funds: A Capital Structure Case Study' (Dec. 2, 2013);

--'2014 Outlook: Closed-End Funds (Structural Protections Support Rating Stability)' (Dec. 13, 2013).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716220

MLP Closed-End Funds: A Capital Structure Case Study

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723839

2014 Outlook: Closed-End Funds (Structural Protections Support Rating Stability)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726592

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813114

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst:
Greg Fayvilevich, +1-212-908-9151
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Russ Thomas, +1-312-368-3189
Director
or
Committee Chairperson:
Ian Rasmussen, +1-212-908-0232
Senior Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
brian.bertsch@fitchratings.com


© Business Wire 2013
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