Fitch Ratings assigns 'AAA' ratings to the following senior
unsecured notes issued (Notes) by Tortoise Energy Infrastructure
Corp (NYSE MKT: TYG):
--$10 million of series II Notes, 3.22% fixed rate, due Dec. 18,
2022;
--$20 million of series JJ Notes, 3.34% fixed rate, due Dec. 18,
2023;
--$10 million of series KK Notes, 3.53% fixed rate, due Dec. 18,
2025.
Fitch also affirms the ratings on existing senior unsecured
notes and MRPS as listed at the bottom of this press-release.
KEY RATING DRIVERS
The rating assignments and affirmations reflect:
--Sufficient asset coverage provided to senior notes and 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 Tortoise Capital Advisors, LLC as
investment advisor.
FUND PROFILE
TYG is a non-diversified, closed-end management investment
company with the goal of obtaining a high level of total return
with an emphasis on current distributions. The fund invests the
majority of its portfolios in equity securities of publicly-traded
Master Limited Partnerships (MLP) and their affiliates in the
energy infrastructure sector. These companies gather, transport,
process, store, distribute or market natural gas, natural gas
liquids, coal, crude oil, refined petroleum products or other
natural resources, or explore, develop, manage or produce such
commodities.
FUND LEVERAGE
TYG manages a portfolio of approximately $4,600 million in
assets and had pro forma leverage of $905 million using Nov. 21,
2014 figures. The total leverage ratio is approximately 19.7%.
Pro-forma leverage consists of approximately $65 million in bank
borrowings, $545 million in Fitch-rated senior notes (pari-passu to
the bank borrowings), and $295 million in junior Fitch-rated
MRPS.
ASSET COVERAGE
The funds' asset coverage ratio, as calculated in accordance
with the Fitch total and net overcollateralization tests (Fitch OC
tests) per the 'AAA' rating guidelines for the senior notes and 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 funds' 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 notes, as
calculated in accordance with the Investment Company Act of 1940
(1940 Act) at current market values, was in excess of 300%. The
funds' pro forma asset coverage ratio for total leverage, including
the MRPS, as calculated in accordance with the 1940 Act also at
current market values, was in excess of 200%. These are the minimum
asset coverage ratios required by the funds' governing
documents.
NOTES STRUCTURAL PROTECTIONS
Should the asset coverage tests decline below their minimum
threshold amounts (as tested on the last business day of each
week), under the terms of the senior notes the funds are required
to deliver notice to the note purchasers within five business days.
The funds' managers are then expected to cure the breach by
altering the composition of the portfolio toward assets with lower
discount factors (for Fitch OC Tests breaches), or by reducing
leverage in a sufficient amount (for both the Fitch OC Tests and
the 1940 Act test breaches) within a pre-specified time period (a
maximum of 47 calendar days for the Fitch OC Tests and a longer
period for the 1940 Act test).
Failure to cure an asset coverage breach as described above is
an event of default under the terms of the notes. The funds must
then deliver a notice within five business days to the senior note
purchasers and a majority vote of note purchasers may then declare
all the notes then outstanding to be immediately due and
payable.
The fund is also prohibited from paying out a common stock
dividend if it fails to cure a breach to the notes' 300% 1940 Act
asset coverage test. Fitch views this as an added incentive to cure
and deleverage in a timely manner, regardless of acceleration by
the notes purchasers.
MRPS STRUCTURAL PROTECTIONS
Should the MRPS Asset Coverage Test and Fitch OC Test decline
below their minimum threshold amounts (as tested weekly) the funds
are required to deliver notice to the MRPS purchasers within five
days of becoming aware of such fact.
The fund's managers are required to cure the breach by altering
the composition of the portfolio toward assets with lower discount
factors (for Fitch OC Tests breaches), or by reducing leverage in a
sufficient amount (for both the Fitch OC Tests and Asset Coverage
Test breaches) within a pre-specified time period (a maximum of 47
calendar days).
THE ADVISOR
Tortoise, a wholly owned subsidiary of Tortoise Holdings, LLC,
is the fund's investment adviser, responsible for the fund's
overall investment strategy and its implementation. The advisor was
formed in October 2002 and, as of Nov. 30, 2014, it had
approximately $17.7 billion in assets under management. Montage
Asset Management, LLC, a wholly-owned entity of Mariner Holdings,
LLC owns approximately 61% of Tortoise Holdings, LLC, with the
remaining interest held by certain senior Tortoise employees.
CONCURRENT RATING AFFIRMATIONS
Fitch affirms the following ratings:
Tortoise Energy Infrastructure Corporation (TYG):
--$110,000,000 6.11% Series E senior notes due on April 10, 2015
at 'AAA';
--$30,000,000 5.85% Series G senior notes due on Dec. 21, 2016
at 'AAA';
--$10,000,000 4.35% Series I senior notes due on May 12, 2018 at
'AAA';
--$15,000,000 3.30% Series J senior notes due on Dec. 19, 2019
at 'AAA';
--$10,000,000 3.87% Series K senior notes due on Dec. 19, 2022
at 'AAA';
--$20,000,000 3.99% Series L senior notes due on Dec. 19, 2024
at 'AAA';
--$13,000,000 2.75% Series M senior notes due on Sept. 27, 2017
at 'AAA';
--$10,000,000 3.15% Series N senior notes due on Sept. 27, 2018
at 'AAA';
--$15,000,000 3.78% Series O senior notes due on Sept. 27, 2020
at 'AAA';
--$12,000,000 4.39% Series P senior notes due on Sept. 27, 2023
at 'AAA';
--$10,000,000 Series Q floating rate senior notes due on Sept.
27, 2018 at 'AAA';
--$25,000,000 3.77% Series R senior notes due on Jan. 22, 2022
at 'AAA';
--$10,000,000 3.99% Series S senior notes due on Jan. 22, 2023
at 'AAA';
--$25,000,000 4.16% Series T senior notes due on Jan. 22, 2024
at 'AAA';
--$35,000,000 Series U floating rate senior notes due on April
17, 2019 at 'AAA';
--$39,400,000 6.07% Series V senior notes due on Dec 21, 2014 at
'AAA';
--$12,500,000 3.88% Series W senior notes due on June 15, 2016
at 'AAA';
--$12,500,000 4.55% Series X senior notes due on June 15, 2018
at 'AAA';
--$12,500,000 2.77% Series Y senior notes due on June 14, 2020
at 'AAA';
--$12,500,000 2.98% Series Z senior notes due on June 14, 2021
at 'AAA';
--$10,000,000 3.48% Series AA senior notes due on June 14, 2025
at 'AAA';
--$12,000,000 2.75% Series BB senior notes due on Sept. 27, 2017
at 'AAA';
--$15,000,000 3.48% Series CC senior notes due on Sept. 27, 2019
at 'AAA';
--$13,000,000 4.21% Series DD senior notes due on Sept. 27, 2022
at 'AAA';
--$5,000,000 Series EE floating rate senior notes due on Sept.
27, 2018 at 'AAA';
--$10,000,000 4.16% Series FF senior notes due on Nov. 20, 2023
at 'AAA';
--$20,000,000 Series GG floating rate senior notes due on April
17, 2019 at 'AAA';
--$20,000,000 Series HH floating rate senior notes due on Sept.
9, 2019 at 'AAA';
--$80,000,000 of Series B MRPS, 4.375% fixed rate, due on Dec.
31, 2027 at 'AA';
--$50,000,000 of Series C MRPS, 3.95% fixed rate, due on May 1,
2018 at 'AA';
--$85,000,000 Series D MRPS, 4.01% fixed rate, due on 12/17/2021
at 'AA';
--$80,000,000 Series E MRPS, 4.34% fixed rate, due on 12/17/2024
at 'AA'.
Fitch also notes that the Series V senior notes are due Dec. 21,
2014 and expects them to be paid in full on the next business
day.
RATINGS SENSITIVITY
The rating is based on the terms stipulating mandatory
collateral maintenance and de-leveraging provisions in the event of
asset coverage declines. In the case of the rated notes, should the
fund fail to cure an asset coverage breach, or the note purchasers
not declare the notes due and payable upon an event of default,
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 fund. A material
adverse deviation from Fitch guidelines for any key rating driver
could cause the ratings 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 forthcoming complimentary closed-end fund research
from Fitch, opt-in at the following link:
http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/
Additional information is available at www.fitchratings.com.
The sources of information used to assess this rating were the
public domain and Tortoise Capital Advisors.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Sept. 4,
2014);
--'MLP Closed-End Funds: A Capital Structure Case Study' (Dec.
2, 2013);
--'2014 Outlook: U.S. Closed-End Fund Leverage' (Jan. 14,
2014);
--'Use of Leverage in U.S. Closed-End Funds (Slidedeck
Apr-2014)' (May 1, 2014);
--'Fitch: US Closed-End Funds Pick Up Steam in Private
Placements' (June 2, 2014).
Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=765528
MLP Closed-End Funds: A Capital Structure Case Study
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723839
2015 Outlook: Closed-End Funds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=824608
Use of Leverage in U.S. Closed-End Funds (Slidedeck
Apr-2014)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=747937
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=958635
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Fitch RatingsPrimary AnalystYuriy Layvand, CFA,
+1-212-908-9191DirectorFitch Ratings, Inc.33 Whitehall StreetNew
York, New York, 10004orSecondary AnalystBenjamin Han,
+1-212-908-9177AnalystorCommittee ChairpersonRalph Aurora,
+1-212-908-0528Senior DirectororMedia RelationsBrian Bertsch, New
York, +1-212-908-0549brian.bertsch@fitchratings.com