Fitch Rates New BlackRock Closed-End Fund Remarketable VMTP Shares 'AAA'
NEW YORK -- January 10, 2013
Fitch Ratings assigns an 'AAA' rating to new remarketable variable rate muni
term preferred shares (RVMTP Shares) issued by BlackRock Municipal Target Term
Trust (NYSE: BTT).
BlackRock Municipal Target Term Trust (NYSE: BTT)
--Up to $750,000,000 of Series W-7 RVMTP Shares, with a liquidation preference
of $5,000,000 per share, due Dec. 31, 2030.
The fund's first issuance of the RVMTP Shares has closed today Thursday Jan.
10, 2013. The RVMTP Shares are being privately placed with one or more
qualified institutional buyers via a 144a offering. Proceeds will be used by
the fund to purchase additional assets in line with the strategy and
guidelines of the fund prospectus. Fitch expects the issuances of RVMTP Shares
to be executed in one or more transactions during the course of several weeks
following this closing. Total issuance size may be equal to or smaller than
$750,000,000 depending on market conditions, investor demand, and other
KEY RATING DRIVERS
The 'AAA' long-term rating primarily reflects:
--Sufficient asset coverage provided to the preferred shares 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 BlackRock Advisors, LLC. as investment advisor.
The fund is a closed-end management investment company regulated by the
Investment Company Act of 1940. The fund's investment objectives are to
provide current income that is exempt from regular federal income tax and to
return $25.00 per common share to holders of common shares on or about Dec.
Under normal market conditions, the fund expects to invest at least 80% of its
total assets in a portfolio of municipal obligations rated at least 'BBB' by
Fitch or equivalent or, if unrated, are considered by the fund's investment
adviser to be of comparable quality.
As of Dec. 31, 2012, the fund's managed assets were $2,162 million, when
including the economic ownership of municipal bonds held through tender option
bond conduits but excluding the effect of expected RVMTP Shares issuance. As
of the same date, leverage in the form of floating rate notes of tender option
bonds comprised $463 million, or 21.5% of managed assets. Following the
issuance of RVMTP Shares, total leverage is expected to range from 35% to 40%,
but at all times will be limited by the fund's 45% effective leverage ratio
covenant (see below).
As of end of December 2012, the fund's pro forma asset coverage ratio, as
calculated in accordance with the Fitch total and net over-collateralization
tests per the 'AAA' rating guidelines outlined in Fitch's criteria, was in
excess of 100%, which is the minimum threshold required under the RVMTP
Shares' transactional documents.
As of the same date, the fund's asset coverage ratio for RVMTP Shares, as
calculated in accordance with the Investment Company Act of 1940, was in
excess of the minimum asset coverage threshold of 225% as currently set by
corresponding transactional documents.
The fund has also covenanted to maintain an effective leverage ratio for both
the preferred shares and floating-rate certificates of tender option bonds
below 45%. The fund's Effective Leverage Ratio is anticipated to remain below
45% following the issuance of RVMTP Shares.
In the event of asset coverage decline, the RVMTP Shares' transactional
documents require the fund to reduce leverage in order to restore compliance
with the particular test(s) breaching the required threshold(s).
BlackRock Advisors, LLC, a subsidiary of BlackRock, Inc., is the advisor to
the fund, responsible for the overall investment strategies and their
implementation. BlackRock, Inc. and its affiliates had approximately $3.673
trillion of assets under management as of Sept. 30, 2012.
The rating assigned to the RVMTP Shares may be sensitive to material changes
in the leverage composition, portfolio credit quality, portfolio
diversification or market risk of the fund, as described above. A material
adverse deviation from Fitch guidelines for any key rating driver could result
in a downgrade by Fitch.
For additional information about Fitch rating guidelines applicable to debt
and preferred stock issued by closed-end funds, please review the criteria
referenced below, which can be found on Fitch's web site at
To opt in to Fitch's complimentary closed-end fund research, follow the link
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 BlackRock Advisors, LLC.
Applicable Criteria and Related Research:
--'2013 Outlook: Closed-End Funds' (Dec. 14, 2012);
--'Municipal CEF Leverage Continues to Evolve' (Nov. 27, 2012);
--'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk'
(Oct. 11, 2012);
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2012);
--'Municipal CEFs Refinance Pre-Crisis ARPS' (May 3, 2012);
--'Primer: CEF Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Municipal CEF Leverage Continues to Evolve
Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk
Rating Closed-End Fund Debt and Preferred Stock
Municipal CEFs Refinance Pre-Crisis ARPS
Primer: CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs
Target Short-Term, Money Market Investors)
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Yuriy Layvand, CFA, +1-212-908-9191
One State Street Plaza
New York, NY 10004
Gwen Fink-Stone, +1-212-908-9128
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Brian Bertsch, +1-212-908-0549
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