Fitch Rates MRPS Issued by Center Coast MLP & Infrastructure Fund 'A'
--$50,000,000 of Series A MRPS.
The MRP Shares will pay quarterly cash dividends at a rate of 4.29% per annum. The MRP Shares have a term redemption date of Sept. 26, 2026.
KEY RATING DRIVERS
The ratings primarily reflect:
--Sufficient asset coverage provided to the preferred shares as calculated per the fund's overcollateralization (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 Center Coast as investment advisor.
The fund's asset coverage ratios were in excess of 100%, as calculated in accordance with the Fitch total and net overcollateralization tests per the 'A' rating guidelines outlined in Fitch's criteria (Fitch OC Tests). These are the minimum asset coverage guidelines required by the fund's governing documents and evaluated as such by Fitch compared to the assigned rating levels.
The Fitch OC tests calculate standardized asset coverage by applying haircuts to portfolio holdings based on risk and diversification of the assets and measuring a fund's 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 ratios for total leverage, including the MRPS, was in excess of 225%, as calculated in accordance with the Investment Company Act of 1940 (the 1940 Act). This is the minimum asset coverage threshold required by 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.
Should the MRPS asset coverage tests decline below their minimum threshold amounts 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 a 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). These actions are required to be completed within a pre-specified time period consistent with Fitch's 40 to 60 business-day criteria guideline.
CEN's primary investment objective is to provide a high level of total return with an emphasis on distributions to shareholders. To achieve this objective, CEN invests primarily in MLPs and energy infrastructure companies. Center Coast emphasizes investments in issuers participating in the business of operating oil and gas pipelines, refined products, terminals and storage facilities. The portfolio is invested in approximately 20 to 35 MLPs that Center Coast has evaluated based on asset, asset mix, contract mix, strategic positioning, and GP strength and management teams.
The rating reflects the portfolio's concentration at the individual issuer level. CEN also holds a large private investment position in the portfolio which is afforded no credit when calculating the Fitch OC tests.
THE FUNDS' ADVISER
Center Coast is the funds' investment advisor responsible for the fund's overall investment strategies. Center Coast is a registered investment advisor headquartered in Houston, Texas focusing on energy-related master limited partnerships (MLPs) and was incorporated in 2007. As of June 30, 2016, Center Coast had $3.5 billion of assets under management.
The rating is based on the terms of the MRPS stipulating mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines. Should the funds fail to cure 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 funds. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.