Fitch Ratings has affirmed the 'AAA' ratings assigned to the following auction market preferred shares (AMPS) issued by two leveraged closed-end funds advised by Pioneer Investments Management Inc. (Pioneer):
Pioneer Floating Rate Trust (NYSE: PHD):
--$60,850,000 of auction
market preferred shares, series M7 with a liquidation preference of
$25,000 per share;
--$60,800,000 of auction market preferred
shares, series Th7 with a liquidation preference of $25,000 per share;
--$60,800,000
of auction market preferred shares, series W7 with a liquidation
preference of $25,000 per share.
Pioneer High Income Trust (NYSE: PHT):
--$50,500,000 of auction
market preferred shares, series M, with a liquidation preference of
$25,000 per share;
--$50,500,000 of auction market preferred
shares, series W, with a liquidation preference of $25,000 per share;
--$50,000,000
of auction market preferred shares, series TH, with a liquidation
preference of $25,000 per share.
KEY RATING DRIVERS
The affirmation of the 'AAA' ratings reflects:
--Sufficient
asset coverage provided to the AMPS by the underlying portfolios of
assets;
--The structural protections afforded by mandatory
de-leveraging provisions in the event of asset coverage declines;
--The
legal and regulatory parameters that govern the funds' operations;
--The
capabilities of Pioneer as investment advisor.
Fitch's ratings assigned to the AMPS speak only to the credit risk of the securities and not to potential liquidity in the secondary market.
LEVERAGE
As of Jan. 27, 2012, PHD's total assets were approximately
$507 million, and total leverage, consisting of AMPS, was approximately
$182 million, or 35% of total assets. As of the same date, PHT's total
assets were approximately $526 million and total leverage, consisting of
AMPS was approximately $151 million, or 29% of total assets.
ASSET COVERAGE
At the time of the rating affirmations, the funds'
asset coverage ratios, as calculated in accordance with the Fitch total
and net overcollateralization tests (Fitch OC tests) per the 'AAA'
rating guidelines outlined in Fitch's applicable criteria, were in
excess of 100%, which is the minimum asset coverage amount deemed
consistent with an 'AAA' rating. The funds' governing documents require
that asset coverage for the ARPS, as calculated in accordance with the
Fitch OC tests, be maintained in excess of 100%. As such, should the
asset coverage decline below 100%, the governing documents require the
funds to restore compliance within a 40 business day period.
Additionally, as of the same date, the funds' asset coverage ratios for total outstanding AMPS, as calculated in accordance with Pioneer's interpretation of the Investment Company Act of 1940, were in excess of 200%, which is also a minimum asset coverage required by the funds' governing documents.
PIONEER FLOATING RATE TRUST (PHD):
PHD is a diversified, closed-end
management investment company, registered under the 1940 Act that
commenced operations in December 2004. The fund's investment objective
is to seek high current income with a secondary objective of capital
preservation. The fund seeks to achieve these objectives by investing at
least 80% of its assets in senior floating-rate loans, all or any
portion of which may be below investment-grade. The fund also may invest
in other floating- and variable-rate instruments, including senior
loans, second lien loans and high-yield corporate bonds. The fund does
not have a policy of maintaining a specific average credit quality, or a
minimum portion of its portfolio that must be rated investment grade.
As of Jan. 27, 2012, leveraged loans constituted approximately 84% of the portfolio. As of the same date, approximately 15% of the portfolio was invested in the healthcare sector and approximately 13% was invested in the computer and electronics, telecommunications sector. Other notable industry concentrations included automobiles, building and materials, chemicals (9%), business services (8%) and aerospace and defense (5%).
PIONEER HIGH INCOME TRUST (PHT):
PHT is a diversified, closed-end
management investment company, registered under the 1940 Act that
commenced operations in April 2002. The fund's investment objective is
to seek high current income with a secondary objective of capital
appreciation. The fund seeks to achieve these objectives by investing at
least 80% of its assets below investment-grade (high-yield) debt
securities, loans and preferred stock. While the fund may have some
exposure to emerging market debt and international high-yield bonds, the
focus is on domestic high-yield securities. The fund may also invest up
to 50% of the total assets in illiquid securities.
As of Jan. 27, 2012, 88% of the portfolio consisted of corporate bonds, with the remainder of the portfolio invested in municipal bonds, cash equivalents, collateralized mortgage obligations, catastrophe bonds, convertible preferred stock and common stock. Banking, finance and insurance was the fund's largest sector concentration and accounted for approximately 13% of the portfolio. The next largest sector concentrations were automobiles, building and materials, chemicals (11%), energy (oil and gas) (10%), healthcare (7%), and business services (6%).
THE ADVISOR
Pioneer acts as the funds' investment advisor and is a
wholly owned subsidiary of Pioneer Global Asset Management S.p.A., an
investment management arm of UniCredit Banking Group. As of Dec. 31,
2011, Pioneer Global Asset Management S.p.A. had approximately $210
billion of assets under management.
RATING SENSITIVITY
The assigned ratings may be sensitive to
material changes in the leverage composition, portfolio credit quality
or market risk of the fund. A material adverse deviation from Fitch
guidelines for any key rating driver could cause the rating to be
lowered by Fitch.
For additional information about Fitch's rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at www.fitchratings.com.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess these ratings were Pioneer and the public domain.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund
Debt and Preferred Stock' (Aug. 16, 2011);
--'Global Rating
Criteria for Asset-Backed Commercial Paper' (Nov. 10, 2011);
--'2012
Outlook: Closed-End Fund Leverage' (Dec. 19, 2011);
--'Closed-End
Funds: Derivatives Under Review' (Nov. 16, 2011);
--'Primer: CEF
Variable-Rate Demand Preferred Shares' (Oct. 27, 2011).
Applicable Criteria and Related Research:
Rating Closed-End Fund
Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840
Global
Rating Criteria for Asset-Backed Commercial Paper
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=655450
2012
Outlook: Closed-End Fund Leverage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=660709
Closed-End
Funds: Derivatives Under Review (Increased Use and Limited Transparency
Are Key Considerations)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656591
Primer:
CEF Variable-Rate Demand Preferred Shares (Closed-End Fund VRDPs Target
Short-Term, Money Market Investors)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654295
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