NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'AAA' ratings assigned to the auction market preferred shares (AMPS) issued by Eaton Vance Senior Floating-Rate Trust (NYSE: EFR), a closed-end fund managed by Eaton Vance Management:
--$131,300,000 of AMPS series A, B, C and D, each with a liquidation preference of $25,000 per share at 'AAA'.
KEY RATING DRIVERS
The affirmation follows Fitch's annual reviews of EFR and reflects:
--Sufficient asset coverage relative to Fitch's published criteria;
--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the fund's operations;
--The capabilities of Eaton Vance Management as the investment advisor.
Fitch's ratings on AMPS speak only to timely repayment of interest and principal in accordance with the governing documents and not to potential liquidity in the secondary market.
LEVERAGE
As of Jan. 31, 2013, the fund had total assets of approximately $862 million and leverage of $311 million or 36% of assets. Leverage consisted of approximately $180 million from a bank credit facility and $131 million of rated AMPS.
ASSET COVERAGE
As of the same date, the fund's asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC tests) per the 'AAA' rating guidelines outlined in Fitch's closed-end fund criteria, were in excess of 100%, which is the minimum asset coverage amount deemed consistent with an 'AAA' rating per Fitch's criteria. The fund's governing documents require that asset coverage for the AMPS, as calculated in accordance with the Fitch OC tests, be maintained in excess of 100%. The governing documents require the fund to restore compliance within a 28 business-day period if asset coverage declines below 100%.
Additionally, the fund's asset coverage ratios for total outstanding AMPS and senior borrowings, as calculated in accordance with the Investment Company Act of 1940, were in excess of 200%, which is also a minimum asset coverage required by the fund's governing documents.
FUND PROFILES
EFR is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended that commenced operations in November 2003.
The fund has the investment objective of providing a high level of current income, with a secondary objective of seeking capital preservation. Under normal circumstances, the fund will seek to invest at least 80% of portfolio assets in senior loans. The fund may also invest in second-lien loans and high-yield bonds.
As of Jan. 31, 2013, senior loans comprised approximately 90% the fund's total assets. The fund also held high-yield corporate bonds, short-term liquid securities and, to a lesser extent, structured finance and equity securities. The fund's top sector concentrations were in the Fitch sector categories of health care; and computer and electronics, telecommunications. Given the high levels of issuer and sector diversification of the fund's assets, in accordance with Fitch's applicable rating criteria, no additional haircuts were added to the asset specific discount factors used for calculating asset coverage.
The fund may purchase senior loans that may be fully or partially unfunded and the commitments of which the fund is obligated to fulfill at the borrower's discretion. Fitch reviewed the size of unfunded loan commitments as of Jan. 31, 2013 and found them to be less than 1% of total assets.
As of the same date, the fund invested in foreign currency denominated securities and utilized forward foreign currency exchange contracts to hedge the potential exchange rate risk associated with such investments. Fitch notes that for unhedged positions, exchange rate risk is included as part of Fitch's assessment of the sufficiency of asset coverage available to rated AMPS.
THE ADVISOR
Eaton Vance Management, a subsidiary of Eaton Vance Corp. acts as the investment adviser to the fund. As of Dec. 31, 2012, Eaton Vance Corp. and affiliates managed approximately $252 billion in assets.
RATING SENSITIVITIES
The ratings may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered by Fitch. For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess this rating were the public domain and Eaton Vance Management.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 15, 2012);
--'2013 Outlook: Closed-End Funds' (Dec. 14, 2012).
Applicable Criteria and Related Research
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686101
2013 Outlook: Closed-End Funds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696831
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