OREANDA-NEWS. Fitch Ratings has assigned 'AAA' ratings to the following new series of Senior Secured Notes issued by DNP Select Income Fund Inc. (NYSE: DNP), a diversified closed-end fund managed by Duff & Phelps Investment Management Co. (Duff & Phelps):

--$100,000,000 2.76% Series A Senior Secured Notes, due July 22, 2023;

--$200,000,000 3.00% Series B Senior Secured Notes, due July 22, 2026.

Fitch also affirms the following ratings on the fund's existing mandatory redeemable preferred stock (MRPS):

--$132,000,000 of series A MRPS, due 2019, at 'AAA';

--$60,000,000 of series B MRPS, due 2021 at 'AAA';

--$75,000,000 of series C MRPS, due 2024 at 'AAA';

--$33,000,000 of series D MRPS, due 2021 at 'AAA'.

KEY RATING DRIVERS

The rating affirmation primarily reflects:

--Sufficient asset coverage provided to notes and MRPS as calculated per the funds' over-collateralization (OC) tests;

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

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

--The capabilities of Duff & Phelps Investment Management Co. as investment advisor.

ASSET COVERAGE

The fund's asset coverage ratio, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC Tests) per the 'AAA' rating guidelines, outlined in Fitch's applicable criteria, were in excess of 100%. These are the minimum asset coverage guidelines required by the fund's governing documents and evaluated as such by Fitch to arrive at the assigned rating levels.

The Fitch OC tests calculate standardized asset coverage by applying haircuts to portfolio holdings based on riskiness and diversification of the assets and measuring their ability to cover both on - and off-balance-sheet liabilities at the stress level that corresponds to the assigned rating.

On the date of Fitch's review, the fund's asset coverage ratio for total leverage, including both the notes and MRPS, as calculated in accordance with the Investment Company Act of 1940 (the 1940 Act), was in excess of 225%. Also on the date of Fitch's review, the funds' asset coverage ratio for total debt, as calculated in accordance with the 1940 Act, was in excess of 300%. These are the minimum asset coverage ratios required by the 1940 Act and the fund's governing documents.

In the event of breaches to any of the above thresholds, the fund is required to restore compliance per structural protections described below.

NOTES STRUCTURAL PROTECTIONS

Should the asset coverage tests decline below their minimum threshold amounts (as tested on the last business day of each week for Fitch OC Tests and on the last business day of each month for 1940 Act tests), under the terms of the notes, the fund is required to deliver notice to the note purchasers within five business days. The fund is then expected to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC Tests breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC tests and the 1940 Act test breaches) within a pre-specified time period (a maximum of 45 calendar days, approximately 32 business days).

Failure to cure an asset coverage breach as described above is an Event of Default under the terms of the notes. The fund must then deliver a notice within five business days to the note purchasers and all notes outstanding and any accrued interest is immediately due and payable if a majority of noteholders vote for acceleration.

The fund is also prohibited from paying out a common stock dividend if it fails to cure a breach to the notes' 300% 1940 Act asset coverage test. Fitch views this as an added incentive to cure and deleverage in a timely manner, regardless of acceleration by the notes purchasers.

PARI PASSU CLAIM WITH CREDIT FACILITY

Upon the occurrence of an Event of Default per the Note Purchase Agreement (such as a failure to cure an asset coverage breach) or per the fund's Credit Agreement, the noteholders and the bank lender will share in their claim on fund assets pari passu when receiving payments as described in each of those agreements. The fund accounts for this pari passu status in their calculation of the Fitch OC tests.

MRPS STRUCTURAL PROTECTIONS

Should the MRPS asset coverage tests decline below their minimum threshold amounts (as tested weekly) the fund is required to deliver notice to the MRPS purchasers within five days of becoming aware of such fact.

The fund manager is required to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC Test breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC Tests and 1940 Act asset coverage test breaches) within a pre-specified time period (a maximum of 65 calendar days, approximately 45 business days).

THE FUND

The fund's objectives are current income and long-term growth of income with capital appreciation as a secondary objective. The Fund seeks to achieve its investment objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industry. The Fund's investment strategies have been developed to take advantage of the income and growth characteristics and historical performances of securities of companies in the public utilities industry. Under normal conditions, more than 65% of the Fund's total assets will be invested in securities of public utility companies engaged in the production, transmission or distribution of electric energy, gas or telephone services.

THE FUND'S ADVISER

Duff & Phelps Investment Management Co. (Duff & Phelps) is the fund manager and responsible for the implementation and execution of the investment strategies on a day-to-day basis. Duff & Phelps is an SEC registered investment advisor with $9.2 billion in assets under management as of Dec. 31, 2015. Duff & Phelps' managed mutual funds and closed-end funds provide investment opportunities in global infrastructure, global real estate and municipal and corporate bonds.

RATING SENSITIVITY

The rating is based on the terms of the Notes and MRPS stipulating mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines. Should the fund fail to cure an asset coverage breach, or the Note purchasers not declare the Notes due and payable upon an event of default due to an asset coverage breach, this may lengthen exposure to market value risk and cause the ratings to be lowered by Fitch.

The ratings may also be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.