OREANDA-NEWS. Leverage in the taxable closed-end fund (CEF) sector has increased by $1.3 billion since September 2014. The sector has refinanced another $200 million of auction preferred stock (ARPS) using various tender offers at or below par, leaving just $2.6 billion across 18 funds today, according to a Fitch Ratings market update. Bank funding (i.e. facility, prime brokerage, and repos) is up over $1.2 billion over the same time period.

Despite pressures in the commodities market and consequent NAV declines, MLP CEFs have continued to access capital markets. Fitch rated MLP CEFs have issued $760 million of private notes and preferred stock year to date across six funds. Over 90% of this issuance carried a fixed coupon structure, and all issuance held a final maturity of 2020 or beyond.

In the municipal sector, CEFs have issued nearly $2.4 billion in new preferred stock since September 2014, which were sold to banks, money market funds and retail investors. Issuance continues to be driven mostly by the need to refinance existing obligations, issue new leverage, and use proceeds to redeem ARPS. Overall the sector has refinanced about $434 million of ARPS across six funds, leaving $3.3 billion today.

Fitch presented this market update with Capital Link on Sept. 22, 2015. An audio replay and transcript may be accessed at the following link: http://webinars.capitallink.com/2015/fitch/index.html

Readers may also access a pdf copy of the Fitch slide deck titled 'Closed-End Fund Issuance of Debt and Preferred Stock' at 'www.fitchratings.com'.