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

15 Oct 2025   |   New York

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KBRA assigns the ‘AAA’ rating and 'Stable' outlook to the additional Senior Notes (Series AAA) with an aggregate size of $60 million and Senior Notes (Series BBB) with an aggregate size of $40 million. Concurrently, KBRA affirms the ‘AAA’ rating to the outstanding Senior Notes and affirms the ‘A+’ ratings to the outstanding Mandatory Redeemable Preferred Stocks issued by Kayne Anderson Energy Infrastructure Fund, Inc. (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 September 30, 2025, senior asset coverage was 687% and total asset coverage was 505%. The Fund is registered under the Investment Company Act of 1940 and is a non-diversified closed-end investment fund. The Fund commenced operations on 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 a current 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). Under the terms of the Fund's leverage agreements, asset coverage must be calculated on a weekly basis. 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..
  • Liquidity: KYN can invest in Level 3 securities which can be 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 total assets were held in Level 3 restricted securities, compared to 5.8% as of May 2024. 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.
  • 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.
  • Adviser Experience: KA Fund Advisors, LLC (“KAFA”) is a subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP”), collectively referred to as “Kayne Anderson" or the "Firm." 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.

Investment Fund Debt Rating Determinants

Quantitative Factors

  • Asset Quality: Asset Quality was determined based on an assessment of the underlying collateral that supports the payment of interest and principal on the Senior Notes and MRPS. Based on an analysis of the Fund’s portfolio, the investments consist primarily of equity securities.
  • Asset Coverage: As a fund registered under the ’40 Act, KYN is subject to regulatory requirements which dictate minimum asset coverage ratios of 300% on senior debt and 200% on total leverage. Furthermore, distributions to common shareholders are not allowed unless asset coverage levels relative to total leverage exceed 225%. This highly incentivizes the Investment Adviser to maintain its asset coverage cushion. Following the stabilization of the Fund’s leverage profile after enduring COVID-19 related market volatility, asset coverage for both the Senior Notes and the MRPS have consistently remained above these target thresholds.
  • Liquidity: The majority of Fund assets are invested in public equity securities which are highly liquid. The portfolio also holds Level 3 securities which are less liquid than securities trading in the open market because of statutory and contractual restrictions on resale.
  • Duration: Due to the ongoing nature of the Fund and its portfolio of assets and management, there is no meaningful duration measurement associated with the underlying collateral supporting this transaction.
  • Cash Flow Analysis: Given the nature of the majority of assets being publicly traded equity securities, the risk of the Fund failing to meet interest and principal obligations on the senior notes and preferred shares is adequately captured in the Asset Coverage and Liquidity determinants. Therefore, KBRA analyzes repayment capacity in the context of the other quantitative determinants described above.

Qualitative Factors

  • Manager Review: KBRA’s manager review considers the Manager’s capabilities, track record and policies and procedures.
  • Other: A key qualitative factor is the Fund adviser’s demonstrated ability and willingness to consistently exceed ’40 Act asset coverage levels.

To access ratings and relevant documents, click here.

Click here to view the report.

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.

The Manager is, or has a relationship with, one or more of KBRA Europe/KBRA UK shareholders that is required to be disclosed under applicable credit rating agency regulation in the EU and/or the UK. Please review KBRA’s shareholder disclosures, which are updated periodically.

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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