Fitch Updates Rating Criteria for Puerto Rico Closed-End Funds
This criteria supplements the CEF master criteria that Fitch published on Sept. 4, 2014 titled 'Rating Closed-End Fund Debt and Preferred Stock,' and updates and replaces the previous report titled 'Rating Puerto Rico Closed-End Fund Debt and Preferred Stock' published on Aug. 14, 2013. The core rating methodology remains intact without any material changes.
PR funds launched prior to 2013 are generally regulated under the Investment Companies Act of Puerto Rico of 1954 (the old PR Act) and newly launched or converted PR funds are regulated under the Puerto Rico Investment Companies Act of 2013 (the new PR Act). While the same criteria for funds regulated under both the old and the new regulations applies, Fitch views the new PR Act as having the potential to be modestly credit positive. See criteria report for more information.
KEY RATING DRIVERS
--The presence of dynamic deleveraging/defeasance triggers;
--The amount of risk-adjusted overcollateralization at the individual, sub-account level, and prudence in leverage management exercised at the fund level;
--The liquidity, diversification and historical volatility of portfolio assets;
--The capabilities of the investment manager to successfully manage fund investment and leverage strategies; and
--Legal/regulatory parameters that govern fund operations.
The criteria report, titled 'Rating Puerto Rico Closed-End Fund Debt and Preferred Stock' (Sept. 4, 2014), is available at 'www.fitchratings.com' or by clicking on the link.
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