Fitch Ratings affirmed the 'AA' ratings to the following variable-rate
term preferred shares (VRTP Shares) issued by Eaton Vance Floating-Rate
Income Trust (NYSE: EFT) and Eaton Vance Floating-Rate Income Plus Fund
(NYSE: EFF), closed-end funds advised by Eaton Vance Management
(Advisor):
EFT
--$80,000,000 of Series C-1 VRTP Shares, with a mandatory redemption
date of Dec. 18, 2015;
EFF
--$36,000,000 of Series C-1 VRTP Shares, with a mandatory redemption
date of July 8, 2016.
KEY RATING DRIVERS
--Structural provisions of the VRTP Shares including the Asset Coverage
and Effective Leverage Ratio tests requiring the funds to maintain
minimum levels of asset coverage;
--Sufficient asset coverage provided to the VRTP Shares as calculated
per the funds' over-collateralization (OC) tests;
--Results of Fitch-performed stress tests meant to compare the funds'
minimum asset coverage tests to the stresses outlined in Fitch's
closed-end fund rating criteria reflecting changes to leverage amount
and portfolio composition;
--Legal and regulatory parameters that govern the funds' operations; and
--The capabilities of the Advisor as investment advisor.
LEVERAGE
As of Jan. 31, 2014, the EFT had total assets of approximately $1
billion and leverage of $380 million, or 38% of assets. Leverage
consisted of approximately $300 million from a bank credit facility and
$80 million of rated VRTP Shares.
As of the same date, EFF had total assets of approximately $236 million
and leverage of $90 million, or 38% of assets. Leverage consisted of $54
million from a bank credit facility and $36 million of rated VRTP Shares.
ASSET COVERAGE
The funds' asset coverage ratios for the VRTP Shares, as calculated in
accordance with the Investment Company Act of 1940, were in excess of
the minimum asset coverage threshold of 225% currently set by the terms
of the preferred shares (Minimum Asset Coverage test).
The funds' governing documents also require the funds to maintain
Effective Leverage Ratios (the calculation of which includes both
preferred shares and forms of senior leverage) below 45% (or 46% if the
increase in the ratio is due exclusively to asset market value
volatility). The funds' Effective Leverage Ratios are currently below
45%.
In the event of asset coverage declines, the funds' governing documents
will require the funds to reduce leverage in order to restore compliance
with the asset coverage test breaching the required threshold.
STRUCTURAL PROTECTIONS
Compliance with the asset coverage and effective leverage ratio
requirements are tested daily. Failure to cure an asset coverage breach
by the Asset Coverage Cure Date results in an Asset Coverage Mandatory
Redemption. Failure to cure an Effective Leverage Ratio breach by the
Effective Leverage Ratio Cure Date results in an Effective Leverage
Ratio Mandatory Redemption.
In the event of an asset coverage breach, subsequent to the Asset
Coverage Cure Date each fund shall redeem a sufficient number of
Preferred Shares to restore asset coverage compliance. The exposure
period to market risk for the preferred shares in the event of a
mandatory redemption due to an asset coverage breach is 28 days,
consistent with Fitch's 60-day criteria guideline.
In the event of an effective leverage ratio breach, subsequent to the
Effective Leverage Ratio Cure Date each fund shall (a) deposit
sufficient funds with the Redemption and Paying Agent for the redemption
of a sufficient number of Preferred Shares to restore effective leverage
ratio compliance, or (b) engage in trades of portfolio assets that would
satisfy the effective leverage ratio requirement. The exposure period to
market risk for the preferred shares in the event of a mandatory
redemption due to an effective leverage ratio breach is no longer than
28 days, consistent with Fitch's 60-day criteria guideline.
STRESS TESTS
Fitch performed various stress tests on the funds to assess the strength
of the structural protections of the VRTP Shares. The funds' asset
coverage and effective leverage tests were compared to the rating
stresses outlined in Fitch's closed-end fund rating criteria. These
tests included determining various 'worst case' scenarios where the
funds' leverage and portfolio composition migrated to the outer limits
of the funds' operating and investment guidelines.
For example, current portfolio composition was stressed by increasing
the funds' issuer concentration, while simultaneously migrating the
portfolio to loans of lower credit quality. The results of the stress
tests indicate the structural protections of the VRTP Shares are in line
with Fitch's rating criteria at an 'AA' rating level. In certain remote
circumstances the asset coverage available to the VRTP Shares fell below
the 'AA' threshold, but in any case did not fall below 'BBB'.
FUND PROFILES
EFT is a diversified, closed-end management investment company
registered under the Investment Company Act of 1940, as amended and
commenced operations in June 2004. The fund has the investment objective
of providing a high level of current income, with a secondary objective
of seeking capital preservation to the extent consistent with its
primary goal of high current income. Under normal market conditions, the
fund will invest at least 80% of assets in senior loans. The fund may
also invest in second-lien loans and high-yield bonds.
EFF is a diversified, closed-end management investment company. The
fund's investment objective is providing total return, with an emphasis
on income. Under normal market conditions, the fund will invest at least
80% of its total assets in senior loans of domestic and foreign
borrowers that are denominated in U.S. dollars and foreign currencies.
The funds may purchase senior loans that are fully or partially unfunded
and the commitments of which the funds are obligated to fulfill at the
borrower's discretion. Fitch reviewed the size of the funds' unfunded
loan commitments and found them to be less than 1% of total assets. The
funds also invests may invest in foreign currency denominated
securities. The funds currently utilizes forward foreign currency
exchange contracts to hedge the potential exchange rate risk associated
with such investments.
THE ADVISOR
Eaton Vance Management, a subsidiary of Eaton Vance Corp., acts as the
investment adviser to the funds. As of December 31, 2013, Eaton Vance
Corp. and affiliates managed approximately $283.3 billion of assets.
RATING SENSITIVITIES
The ratings may be sensitive to material changes in the credit quality
or market risk profile of the funds or the diversification of the
portfolio by issuer or sector. Certain terms relevant to key VRTP Shares
structural protections, including the Minimum Asset Coverage Test and
the Effective Leverage Ratio are set forth in the purchase agreements.
Any future changes to these terms that weaken the structural protections
may have negative rating implications. Material changes to the terms and
provisions of leverage senior to the VRTP Shares or changes to
derivative strategy and usage may also impact the rating assigned to the
VRTP Shares. A material adverse deviation from Fitch guidelines for any
key rating driver could cause the ratings to be lowered by Fitch.
For additional information about Fitch closed-end fund ratings
guidelines, please review the criteria referenced below, which can be
found at 'www.fitchratings.com'.
To receive Fitch's forthcoming research on closed-end funds please go to:
http://forms.fitchratings.com/forms/FAMCEFOptinform
Additional information is available at 'www.fitchratings.com'.
The sources of information used to assess this rating were the public
domain and Eaton Vance.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013).
Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716220
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821965
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