KBRA Affirms the Ratings on the Outstanding Senior Notes and Outstanding Mandatory Redeemable Preferred Shares Issued by Tortoise Energy Infrastructure Corp. and Assigns Ratings on new issuances of Senior Notes and Mandatory Redeemable Preferred Shares
23 Dec 2024 | New York
KBRA affirms the 'AAA' ratings assigned to the Senior Notes and affirms the 'A+' ratings assigned to the Mandatory Redeemable Preferred Shares ("MRPS") issued by Tortoise Energy Infrastructure Corp. (the "Fund" or "TYG") managed by Tortoise Capital Advisors ("Tortoise"). Additionally, KBRA assigns a 'AAA' rating to Senior Notes Series SS, Series TT and Series UU and an 'A+" rating to MRPS Series H and Series I, which were issued by TYG pursuant to the Fund's merger with Tortoise Midstream Energy Fund, Inc. ("NTG"). KBRA simultaneously removes the Watch Developing status on the Senior Notes and MRPS which was assigned on December 6, 2024.
Following the merger, KBRA withdraws the ratings on all of the Senior Notes (Series Q, R and S) and MRPS (Series F and H) of Tortoise Midstream Energy Fund, Inc.
TYG is registered under the Investment Company Act of 1940 (the “'40 Act”) and is a closed-end investment funds, advised by Tortoise. TYG and NTG had their Initial Public Offerings in February 2004 and July 2010 respectively. TYG and formally NTG generally invest in Natural Gas Infrastructure, Renewables & Power Infrastructure, and Liquids Infrastructure. The Fund is also structured as a Regulated Investment Company ("RIC"). Post the merger with NTG, the total outstanding debt of TYG is relatively in line with the total debt of both funds prior to the merger, with TYG assuming the existing Senior Notes and MRPS of NTG as well as increasing the outstanding draw on the TYG credit facility to cover the outstanding credit facility of NTG.
Key Credit Considerations
The ratings for the Senior Notes and MRPS are primarily driven by the Funds’ historically strong asset coverage ratios and liquidity, coupled with Tortoise’s management experience. The Fund has historically demonstrated an ability to remain in compliance with the '40 Act requirements. Since inception, the senior debt asset coverage has averaged above 400% for the Fund, above the 300% senior debt threshold, and total leverage asset coverage has averaged over 300% for the Fund, above the 200% total leverage threshold. In KBRA’s view, Tortoise's ability to withstand various market dislocations demonstrates its strength and the resiliency of its capital structure.
Rating Sensitivities
A deterioration in asset coverage levels below '40 Act requirements and the Fund manager’s inability to liquidate assets and demonstrate intention to cure within the 30-day time-period could result in a negative rating change. Conversely, a trend of stable asset performance coupled with improvements to asset coverage could result in positive rating changes.
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