Fitch Affirms Neuberger Berman Real Estate Securities Income Fund Preferred Stock at 'AA'

NEW YORK--()--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 Management LLC (Advisor):

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

KEY RATING DRIVERS

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 Management LLC as investment Advisor.

FUND PROFILE

NRO is a closed-end management investment company. The fund commenced its operations on Oct. 28, 2003. As of June 30, 2015, the fund managed approximately $442 million in assets, consisting of 61.4% in REIT common stock, 37.1% in REIT preferred stock and 1.5% in cash.

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.

FUND LEVERAGE

The leverage ratio is approximately 28.3%, which consists of approximately $100 million bank borrowing and $25 million Fitch-rated MRPS. Over the past 12 months the fund has maintained a leverage ratio between 23.8%-28.6%.

ASSET COVERAGE

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 200%. These are the minimum asset coverage ratios required by the fund's governing documents.

STRUCTURAL PROTECTIONS

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. The allotted time to restore compliance to the asset coverage tests is consistent with Fitch's 60 business day criteria guideline.

THE ADVISOR

Neuberger Berman Management LLC is an indirect subsidiary of Neuberger Berman Group LLC, which is a private, independent, employee-controlled investment manager founded in 1939. The firm has more than 2100 employees and managed $251 billion in assets across equities, fixed income and other alternative investments as of June 30, 2015.

CLOSED-END FUND CRITERIA EXPOSURE DRAFT

On July 30, 2015 Fitch published an exposure draft proposing changes to its global rating criteria for rating closed-end fund debt and preferred stock and other market value structures. The exposure draft, titled 'Rating Closed-End Fund Debt and Preferred Stock' (July 30, 2015), is available at 'www.fitchratings.com'. The proposed change will not impact the ratings assigned to the NRO MRPS.

RATING SENSITIVITIES

The rating assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio 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.

For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.

To receive Fitch's forthcoming research on closed-end funds please go to:

http://forms.fitchratings.com/forms/FAMCEFOptinform

Additional information is available on www.fitchratings.com

The sources of information used to assess this rating were the public domain and Neuberger Berman Management LLC.

Applicable Criteria

Exposure Draft: Rating Closed-End Fund Debt and Preferred Stock (pub. 30 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868875

Rating Closed-End Fund Debt and Preferred Stock (pub. 04 Sep 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=765528

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989772

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989772

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Ralph Aurora
Senior Director
+1-212-908-0528
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ian Rasmussen
Senior Director
+1-212-908-0232
or
Committee Chairperson
Alastair Sewell, CFA
Senior Director
+44-20-3530-1147
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Ralph Aurora
Senior Director
+1-212-908-0528
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Ian Rasmussen
Senior Director
+1-212-908-0232
or
Committee Chairperson
Alastair Sewell, CFA
Senior Director
+44-20-3530-1147
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com