OREANDA-NEWS. Fitch Ratings has affirmed the 'AA' rating assigned to the following mandatory redeemable preferred stock (MRPS) issued by Neuberger Berman Real Estate Securities Income Fund Inc. (NYSE MKT: NRO) a closed-end fund advised by Neuberger Berman Investment Advisers LLC (Advisor):

--$25,000,000 4.00% series A MRPS, due Sept. 26, 2017.


The rating affirmation reflects:

--Sufficient pro forma asset coverage provided to MRPS as calculated per the fund's asset coverage 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 Neuberger Berman Investment Advisers LLC as investment Advisor.


NRO is a closed-end management investment company. The fund commenced its operations on Oct. 28, 2003. As of June 30, 2016, the fund managed approximately $479 million in assets, consisting of 63.9% in REIT common stock, 35.5% in REIT preferred stock and 0.6% in cash and cash equivalents.

The fund's primary investment objective is high current income and its secondary investment objective is capital appreciation. The fund's investment strategy is to manage a portfolio with a broad mix of real estate securities through superior stock selection and property sector allocation.


The leverage ratio is approximately 26%, which consists of approximately $100 million bank borrowing and $25 million Fitch-rated MRPS.


The fund's asset coverage ratio, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC tests) per the 'AA' rating guidelines for the MRPS, outlined in Fitch's closed-end fund criteria, were in excess of 100%. These are the minimum asset coverage guideline required by the fund's governing documents.

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.

The fund's asset coverage ratio for the senior credit facility, as calculated in accordance with the Investment Company Act of 1940 (1940 Act) at current market value, was in excess of 300%. The fund's pro forma asset coverage ratio for total leverage, including the MRPS, as calculated in accordance with the 1940 Act also at current market value, was in excess of 225%. These are the minimum asset coverage ratios required by the fund's governing documents.


Should the asset coverage tests for the MRPS decline below their minimum threshold amounts and are not cured in a pre-specified timeframe, the transactional documents require the funds to reposition portfolio assets or reduce leverage in a sufficient amount to restore compliance with the applicable tests. In the event of a breach, the allotted time to restore compliance to the asset coverage tests is consistent with Fitch's 60 business day criteria guideline.


Neuberger Berman Investment Advisers LLC is an indirect subsidiary of Neuberger Berman Group LLC, which is a private, independent, employee-controlled investment manager founded in 1939. The firm employed approximately 2,000 employees and managed $246 billion in assets across equities, fixed income, hedge funds and private equity as of June 30, 2016.


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