KBRA Affirms the Ratings on the Outstanding Senior Notes and Outstanding Mandatory Redeemable Preferred Shares Issued by Three TortoiseEcofin Closed End Funds
15 Dec 2023 | New York
KBRA affirms the 'AAA' rating to the Senior Notes and affirms the 'A+' rating assigned to the Mandatory Redeemable Preferred Shares ("MRPS") issued by three closed-end funds, (i) Tortoise Energy Infrastructure Corp. (NYSE: TYG), (ii) Tortoise Midstream Energy Fund, Inc. (NYSE: NTG) and (iii) Tortoise Pipeline & Energy Fund, Inc. (NYSE: TTP), (the "Funds") managed by Tortoise Capital Advisors ("Tortoise"). Additionally, KBRA withdraws the Series G MRPS for NTG and the Series D MRPS for TYG following the pay-off in full at maturity.
The Funds are registered under the Investment Company Act of 1940 (the “'40 Act”) and are closed-end investment funds, advised by Tortoise Capital Advisors, L.L.C. TYG, NTG and TTP had their Initial Public Offerings in February 2004, July 2010 and October 2011, respectively. The Funds generally invest in Natural Gas Infrastructure, Renewables & Power Infrastructure, and Liquids Infrastructure. Moreover, each of the Funds are structured as a Regulated Investment Company ("RIC").
Senior Notes Ratings
- Tortoise Energy Infrastructure Corp. (Series JJ, T, L, AA, NN, KK, OO, PP, and QQ)
- Tortoise Midstream Energy Fund,Inc. (Series Q, R, and S)
- Tortoise Pipeline & Energy Fund, Inc. (Series H)
Mandatory Redeemable Preferred Shares Ratings
- Tortoise Energy Infrastructure Corp. (Series E and F)
- Tortoise Midstream Energy Fund,Inc. (Series E, F, and H)
- Tortoise Pipeline & Energy Fund, Inc. (Series B)
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 Funds have historically demonstrated their ability to remain in compliance with the '40 Act requirements. Since inception, the senior debt asset coverage has averaged above 400% for the Funds, above the 300% senior debt threshold, and total leverage asset coverage has averaged over 300% for the Funds, 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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