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Fitch: U.S. Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk

NEW YORK--(BUSINESS WIRE)-- Today, U.S. municipal leveraged closed-end funds (CEFs) have access to capital across the long, intermediate, and short-term maturities; which diversifies funding and moderates rollover risk in the sector according to a new report published by Fitch Ratings.

About $5.2 billion (or 16%) of total leverage in the sector remains in perpetual ARPS (down from $30.2 billion at end-2007), but $10.2 billion (or 32%) currently consists of newer issued term securities that mature in one to five years, with the remaining $16.4 billion (or 52%) funded with maturities of one year or less. This stand in contrast to the taxable CEF sector where newer term securities have not yet proliferated and 74% of total leverage rolls in maturities of one year or less, according to a related report published earlier by Fitch.

Access to longer-term funding for municipal CEFs was made possible by the successful proliferation of new term-preferred securities, namely MTPs, VMTPs, and VRDPs issued to redeem frozen ARPS. Furthermore, a number of municipal CEFs have recently termed out their shorter-term VRDP shares by placing them privately with investors for an initial term of three years, further moderating rollover risk.

The full report, 'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk', is available at 'www.fitchratings.com.'

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

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

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk

Taxable Closed-End Funds Reliant on Short-Term Debt Reap Low-Cost Funding at the Expense of Rollover Risk

Applicable Criteria and Related Research: Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=691173

Taxable Closed-End Funds Reliant on Short-Term Debt Reap Low-Cost Funding at the Expense of Rollover Risk

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688352

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Fitch Ratings
Yuriy Layvand, CFA
Director
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Fitch, Inc.
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or
Ian Rasmussen
Senior Director
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or
Media Relations:
Brian Bertsch
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brian.bertsch@fitchratings.com

Source: Fitch Ratings