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KBRA Affirms Ratings on Senior Notes and MRPS Issued by Kayne Anderson Energy Infrastructure Fund, Inc.

12 Sep 2025   |   New York

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KBRA affirms the 'AAA' ratings assigned to Senior Notes and affirms the 'A+' ratings assigned to Mandatory Redeemable Preferred Stock issued by Kayne Anderson Energy Infrastructure Fund, Inc. ("KYN" or the "Fund").

The ratings continue to be supported by the asset coverage, the credit quality and liquidity of the underlying assets, and the management experience of the Fund's investment adviser, KA Fund Advisors, LLC (“KAFA”). As of August 2025, senior asset coverage was 723% and total asset coverage was 522%. The Fund is registered under the Investment Company Act of 1940 and is a non-diversified closed-end investment fund. The Fund had its Initial Public Offering September 28, 2004, and its shares are listed on the New York Stock Exchange under the symbol KYN. The Fund’s investment strategy focuses on equity securities of energy infrastructure companies.

Key Credit Considerations

  • Asset Coverage: The Fund is registered under the ’40 Act which imposes minimum asset coverage requirements on leverage. The Fund must maintain at least 200% coverage on total leverage (including senior debt and preferred shares) and 300% on senior debt in order to issue additional debt or preferred shares and pay dividends. The Fund manager has communicated to KBRA that KYN has an internal target of a 55%-60% cushion relative to its financial covenants (i.e. market values could decline by approximately this amount before asset coverage ratios would be equal to financial covenants). Further, under the terms of the MRPS agreements, distributions to common shareholders are prohibited unless total asset coverage exceeds 225%, which incentivizes the Fund to maintain its asset coverage cushion. Under the current terms of the MRPS agreements, asset coverage must be calculated on a weekly basis, compared to the monthly requirement under the ’40 Act. In addition, asset coverage calculations are subject to a 20% maximum contribution from Level 3 securities, which can be comprised of illiquid and harder-to-value assets. These covenants provide additional protection against volatility in both asset valuations and coverage levels. As of August 2025, the Fund’s ’40 Act senior debt and total leverage asset coverage ratios were 723% and 522%, respectively (compared to 625% and 462% respectively as of August 31, 2024), with LTM averages of 660% and 487%. As of May 2025 the allocation to Level 3 securities stood at 3.4%, providing significant cushion against the covenant limit.
  • Non-Diversified Investments: KYN is a non-diversified closed-end mutual fund. Under current guidelines, the Fund will invest at least 80% of total assets in public and private securities of energy infrastructure companies. As a non-diversified fund, the Fund faces idiosyncratic risk which cannot be mitigated through industry diversification.
  • Volatility of Underlying Portfolio: In addition to the risks associated with a non-diversified investment strategy, the Fund faces systemic risks which can have a direct impact on valuations of the underlying portfolio. For example, the valuation of KYN’s portfolio decreased during the volatility experienced during the height of the COVID-19 pandemic and the precipitous decline in oil prices. Although movements in underlying commodity prices affect midstream energy companies less than their upstream counterparts, midstream company valuations are not immune to these fluctuations.
  • Asset Liquidity: KYN can invest in Level 3 securities which are less liquid than securities trading in the open market because of statutory and contractual restrictions on resale. As of May 2025, approximately 3.4% of the Fund’s long-term investments were held in Level 3 restricted securities, compared to 5.8% as of May 2024. While KYN targets a maximum allocation of 10% to 15% to Level 3 assets, actual exposure has historically remained below 10%. The portfolio is primarily composed of publicly traded securities, which contributes to relatively strong asset liquidity. However, the manager remains largely dependent on the ability to execute sales in the public markets, where transaction prices may not always reflect the intrinsic value of the underlying companies.
  • Valuation of Restricted Securities: As of May 2025, KYN held approximately 3.4% of its portfolio assets in Level 3 securities. As KYN continues to explore private investment opportunities, Level 3 restricted securities could become a larger share of the portfolio. Securities that are not publicly traded require valuations to be conducted. In KBRA’s view, the valuation process for these restricted securities is robust in nature; nonetheless, the price to exit a position could be meaningfully different versus KYN’s valuation of the investment.
  • Adviser Experience: KA Fund Advisors, LLC is a subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP”), collectively referred to as “Kayne Anderson.” Founded in 1984, the Firm specializes in alternative investments across real estate, credit, infrastructure and energy. As of June 2025, the Firm managed approximately $38.0 billion in assets under management and employed around 350 professionals, including 150 investment professionals, across offices in the U.S. and Europe.

Rating Sensitivities

  • Asset Coverage: 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 negative rating changes.
  • Manager Quality and Track Record: Changes in management composition or performance of KA FA in its role as Fund Manager can have a positive or negative effect on the outstanding ratings, to the extent KBRA views such changes as being material to the credit of the outstanding rated debt.
  • Asset Quality: A trend of stable asset performance coupled with improvements to asset coverage could result in positive rating changes.

To access ratings and relevant documents, click here.

Click here to view the report.

Related Publications

Methodologies

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA’s Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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