NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has affirmed the 'AA' ratings assigned to $319.5 million
of auction preferred shares issued by Gabelli Dividend & Income Trust
(NYSE:GDV) following a spin-off transaction that was completed on June
23, 2014. Fitch concurrently affirms the 'AA' ratings assigned to $137.5
million in aggregate auction preferred shares outstanding by the three
other Gabelli equity closed-end funds listed below. All funds are
managed by Gabelli Funds, LLC as investment adviser.
Gabelli Equity Trust Inc. (NYSE:GAB)
-- $72,000,000 of auction rate cumulative preferred stock (ARPS), series
-- $28,000,000 of ARPS, series E.
Gabelli Multimedia Trust Inc. (NYSE:GGT)
-- $15,000,000 of ARPS, series C.
Gabelli Utility Trust (NYSE:GUT)
-- $22,500,000 of auction market preferred shares (AMPS), series B.
Gabelli Dividend & Income Trust. (NYSE:GDV)
-- $90,000,000 of AMPS, series B;
-- $108,000,000 of AMPS, series C;
-- $121,500,000 of ARPS, series E.
Fitch ratings above speak only to the auction preferred shares
outstanding by each fund. Fitch has not reviewed or assigned ratings to
the retail fixed-rate preferred shares outstanding by the funds ($234.1
million in GAB, $139.8 million in GDV, $19.8 million in GGT and $28.8
million in GUT).
GDV FUND SPIN-OFF
On June 23, 2014, GDV contributed approximately $100 million of its
assets (previously held in U.S. Treasury bills) to The Gabelli Global
Small and Mid Cap Value Trust (NYSE:GGZ), a newly established equity
closed-end fund. As discussed in the Asset Coverage section below, there
was no material impact on GDV's asset coverage for the rated preferred
shares. As a result of the spin-off, GDV common shareholders will
receive 1 common share of GGZ for every 10 common shares owned of GDV.
KEY RATING DRIVERS
The 'AA' long-term ratings primarily reflect:
--Sufficient asset coverage provided to the preferred shares as
calculated per the funds' over-collateralization (OC) tests;
--The structural protections afforded by mandatory collateral
maintenance and de-leveraging provisions in the event of asset coverage
--The legal and regulatory parameters that govern the funds' operations;
--The capabilities of Gabelli Funds, LLC as investment adviser.
The 'AA' ratings address credit risk only and do not speak to the
liquidity of the preferred shares on the secondary market.
The funds are closed-end management investment companies regulated by
the 1940 Act. As of May 31, 2014, the funds invest primarily in equity
securities of U.S.-based companies and to a lesser extent in
GAB's primary objective is long-term growth of capital with income as a
secondary objective. GAB top equity investments were in broadcasting,
media and cable companies and industrial/manufacturing companies. GGT's
investment objective is long-term growth of capital, with income as a
secondary objective. GGT's top equity investments were in broadcasting,
media and cable companies, and computer and electronics companies. GUT's
primary objective is long-term growth of capital and income. The fund's
top equity investments were in utilities (power), energy (oil & gas);
and computer and electronics companies. GDV's investment objective is to
seek a high level of total return on its assets with an emphasis on
dividends and income. The fund's top equity investments were in energy
(oil & gas); food, beverage and tobacco; and industrial/manufacturing.
As of May 31, 2014, leverage ratios were approximately 19%, 15%, 17% and
18% for GAB, GGT, GUT and GDV, respectively. The funds have both
Fitch-rated auction preferred and non-Fitch rated retail preferred
outstanding. Asset coverage and structural protections for the
Fitch-rated preferred stock is described below.
The funds' asset coverage ratio (pro forma for GDV incorporating the
effect of the spin-off) as calculated in accordance with the Fitch total
and net OC tests (Fitch OC tests) per the 'AA' rating guidelines
outlined in Fitch's closed-end fund criteria, were in excess of 100%.
These are the minimum asset coverage threshold required by the funds'
The Fitch OC tests calculate standardized asset coverage by applying
haircuts to portfolio holdings based on riskiness and diversification of
the assets and measuring their ability to cover both on and off-balance
sheet liabilities at the assigned 'AA' stress level.
The funds' asset coverage ratio, as calculated in accordance with the
Investment Company Act of 1940 (1940 Act) at current market value, were
in excess of 200%. This is the minimum asset coverage threshold required
by the funds' governing documents.
There was no material adverse impact on GDV asset coverage as a result
of the spin-off.
Compliance with the Fitch OC and Asset Coverage tests is tested
periodically. The fund manager is expected to cure any breach by
altering the composition of the portfolio toward assets with lower
discount factors (for Fitch OC breaches), or by reducing leverage in a
sufficient amount (for all other breaches) within a pre-specified time
For Fitch OC and asset coverage tests, the maximum market value exposure
(i.e. valuation, cure and redemption) that preferred shareholders would
be exposed to before cure or redemption is approximately 30 and 113
calendar days, respectively.
Gabelli Funds, LLC is the funds' investment advisor, responsible for the
funds' overall investment strategies, day-to-day operations, and their
implementation. Gabelli Funds, LLC has approximately $26 billion of
assets under management as of March 31, 2014. GAMCO Investors, Inc.
(NYSE:GBL) is the parent company of the investment adviser.
The rating assigned to the preferred shares may be sensitive to material
changes in the leverage composition, portfolio quality or market risk of
the fund, as described above. 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 closed-end fund ratings
guidelines, please review the criteria referenced below, which can be
found on Fitch's website.
To receive forthcoming complimentary closed-end fund research from
Fitch, opt-in at the following link: http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/
Additional information is available at 'www.fitchratings.com'.
The sources of information used to assess this rating were the public
domain and GAMCO Investors, Inc.
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013);
--'MLP Closed-End Funds: A Capital Structure Case Study' (Dec. 2, 2013);
--'2014 Outlook: U.S. Closed-End Fund Leverage' (Jan. 14, 2014);
--'Use of Leverage in U.S. Closed-End Funds (Slidedeck Apr-2014)' (May
--'Fitch: US Closed-End Funds Pick Up Steam in Private Placements' (June
Applicable Criteria and Related Research:
Rating Closed-End Fund Debt and Preferred Stock
MLP Closed-End Funds: A Capital Structure Case Study
2014 Outlook: U.S. Closed-End Fund Leverage
Use of Leverage in U.S. Closed-End Funds (Slidedeck Apr-2014)
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Source: Fitch Ratings