NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'F1' ratings assigned to short-term notes ($216 million currently outstanding) and the 'A' ratings assigned to medium-term notes ($12 million currently outstanding) issued by seven Puerto Rico closed-end funds co-advised by Popular Asset Management and UBS Asset Managers of Puerto Rico. A complete list of the rating actions is at the end of this release.
KEY RATING DRIVERS
The main drivers for the rating actions are the
asset coverage available to the notes at the individual, sub-account
level, the structural protections afforded by mandatory collateral
maintenance provisions in the event of asset coverage declines, the
legal and regulatory parameters that govern the funds' operations, and
the capabilities of UBS Asset Managers of Puerto Rico and Popular Asset
Management as co-advisers. The funds' credit parameters are consistent
with Fitch's Puerto Rico closed-end fund rating criteria at the assigned
rating levels for each series of notes.
FUND SUMMARY
The funds are corporations organized under the laws of
the Commonwealth of Puerto Rico and are duly registered as
non-diversified, closed-end management investment companies under the
Puerto Rico Investment Companies Act, as amended.
The funds normally invest at least 67% of total assets in securities issued by Puerto Rico entities. These include securities issued by the Commonwealth of Puerto Rico, Puerto Rico mortgage-backed and asset-backed securities and corporate obligations and preferred stock of Puerto Rico entities.
The funds increase amounts available for investment through the issuance of preferred stock, debt securities, or other forms of leverage, representing not more than 50% of total assets immediately after any such issuance. Currently the funds utilize short-term and medium-term notes and reverse repurchase agreements.
STRUCTURAL PROTECTIONS
At the time of the ratings affirmations, the
funds' asset coverage ratios, as calculated in accordance with the Fitch
OC tests using the asset specific discount factors and the minimum
discount factors found in the rating guidelines outlined in Fitch's
applicable criteria, were in excess of 100%, which are the minimum asset
coverage amounts deemed consistent with the assigned ratings.
Each fund segregates collateral for each series of 100% Principal Protected Notes (comprised of a medium-term note series and a short-term note series) and preferred stock. The Fitch OC tests calculate asset coverage available to the notes and preferred stock, based on the discounted market price loss expectations and diversification of the assets in each segregated collateral account. Should any such asset coverage tests decline below 100% (as tested weekly) and not be cured within the pre-specified timeframe of five business days, the governing documents would require the fund to reduce leverage in a sufficient amount to restore compliance with the applicable asset coverage tests on the final day of the cure period.
THE ADVISOR
UBS Asset Managers of Puerto Rico and Popular Asset
Management are the funds' investment advisors. Subject to the
supervision of the funds' boards of directors they are responsible for
the funds' overall investment strategy and implementation.
UBS
Asset Managers of Puerto Rico is a division of UBS Trust Company of
Puerto Rico, which is an affiliate of UBS Financial Services
Incorporated of Puerto Rico and Popular Asset Management is a division
of Banco Popular de Puerto Rico.
RATINGS SENSITIVITY
The ratings may be sensitive to material
changes in the credit quality or market risk profiles of the funds. A
material adverse deviation from Fitch guidelines for any key rating
driver could cause the ratings to be lowered by Fitch. Changes in the
supply-demand dynamics with respect to invested collateral types may
influence Fitch's analytical approach to the liquidity of underlying
collateral types. In addition, the amount of leverage assumed by a fund
could also influence Fitch's analytical conclusion if such leverage
increased the likelihood of a bankruptcy stay with respect to the
overall fund.
RATING ACTIONS
Puerto Rico Investors Tax-Free Bond Fund I
--Medium-term
notes series, affirmed at 'A';
--Short-term notes series, affirmed
at 'F1'.
Puerto Rico Investors Tax-Free Fund
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Puerto Rico Investors Tax-Free Fund II
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Puerto Rico Investors Tax-Free Fund III
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Puerto Rico Investors Tax-Free Fund IV
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Puerto Rico Investors Tax-Free Fund V
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Puerto Rico Investors Tax-Free Fund VI
--Medium-term notes series,
affirmed at 'A';
--Short-term notes series, affirmed at 'F1'.
Additional information is available at www.fitchratings.com.
The sources of information used to assess this rating were the public domain and UBS Asset Managers of Puerto Rico and Popular Asset Management.
Applicable Criteria and Related Research:
--'Puerto Rico Closed-End
Fund Debt and Preferred Stock Rating Criteria' (Mar. 30, 2010);
--'Closed-End
Fund Debt and Preferred Stock Rating Criteria' (Aug. 17, 2009).
Applicable Criteria and Related Research:
Puerto Rico Closed-End
Fund Debt and Preferred Stock Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506485
Closed-End
Fund Debt and Preferred Stock Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462492
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