OREANDA-NEWS. Fitch Ratings has reviewed and affirmed the ratings assigned to medium-term and short-term note programs (Note Programs) maintained by 30 Puerto Rico closed-end funds (CEFs) advised by Santander Asset Management LLC., UBS Asset Managers (UBS), and co-advised by Popular Asset Management and UBS Asset Managers of Puerto Rico (Popular). A complete list of rating actions can be found at the end of this release.

On July 30, 2015, Fitch published an exposure draft indicating minor changes to the rating criteria applicable to ratings assigned to notes issued by Puerto Rico closed-end funds (PR CEFs). On Sept. 16, 2015 the proposed changes were formalized. A specific change that impacts the PR CEFs concerns tightening the diversification thresholds for state-level general obligation bonds (GOs) rated below investment grade. The concentration threshold for such issuers is 10% with any amounts above the threshold not included in the Fitch Overcollateralization (OC) Test asset-coverage calculations.

KEY RATING DRIVERS
Given the structural protections of the Note Programs leading to re-allocation of assets in each Note Program's collateral account and the general deleveraging of the PR CEFs over the past few months, asset coverage has remained at levels consistent with the assigned ratings. The affirmations also reflect the funds' ability to keep asset coverage in line with the assigned ratings going forward through increasing portfolio diversification and adjusting the funds' leverage strategy to reflect the volatility in Puerto Rico debt.

The main drivers for the rating actions are:
--The asset coverage available to each series of notes at the individual, sub-account level;
--The structural protections afforded by mandatory collateral maintenance provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the funds' operations;
--The capabilities of the investment adviser for each fund.

FUND SUMMARY
The funds are corporations organized under the laws of the Commonwealth of Puerto Rico, and are duly registered as non-diversified, closed-end management investment companies under the Puerto Rico Investment Companies Act of 1954, as amended.

The funds under normal market conditions invest at least 67% of total assets in securities issued by Puerto Rico entities. These include securities issued by the Commonwealth of Puerto Rico, Puerto Rico mortgage-backed and asset-backed securities, corporate obligations and preferred stock of Puerto Rico entities.

The funds increase amounts available for investment through the issuance of debt securities, or other forms of leverage, representing not more than 50% of total assets immediately after any such issuance. The funds have the ability to use Note Programs and reverse repurchase agreements for fund leverage, although not all facilities are utilized at all times.

STRUCTURAL PROTECTIONS
At the time of the ratings, the funds' asset coverage ratios, as calculated in accordance with the Fitch OC tests using the asset-specific discount factors and the minimum discount factors found in the rating guidelines outlined in Fitch's applicable criteria, were in excess of 100%, which are the minimum asset coverage amounts deemed consistent with the assigned ratings.

Each fund segregates collateral for medium-term note series and short-term note series separately. The Fitch OC tests calculate asset coverage available to the notes based on stressed portfolio market value, given the discount factors in the rating criteria and the diversification of each segregated collateral account. Should any such asset coverage tests decline below 100% (as tested weekly) and not be cured within the pre-specified timeframe of five business days, the governing documents require the collateral agent to reduce leverage in a sufficient amount to restore compliance with the applicable asset coverage tests on the final day of the cure period.

THE ADVISORS

UBS Asset Managers of Puerto Rico is an investment advisor. UBS Asset Managers of Puerto Rico is a division of UBS Trust Company of Puerto Rico, which is an affiliate of UBS Financial Services Incorporated of Puerto Rico. As of June 30, 2015, UBS Asset Managers of Puerto Rico had $4.2 billion of assets under management.

Popular Asset Management is a division of Banco Popular de Puerto Rico. As of June 30, 2015 Popular Asset Management has $2 billion of assets under management.

Santander Asset Management, LLC (SAM Puerto Rico or SAM PR) is an investment advisor. SAM PR is a wholly-owned subsidiary of SAM Investment Holdings Limited (Jersey) (SAM Holdings Jersey), a privately held company organized under the laws of Jersey, United Kingdom, also referred to as SAM Global. SAM Global is owned in part (50%) by SAM UK Investment Holdings Limited, which is owned directly and indirectly by Banco Santander S.A., a public company traded on the New York Stock Exchange. SAM Global is also owned in part (50%) by Sherbrooke Acquisition Corp SPC, a segregated portfolio company incorporated in the Cayman Islands, controlled jointly by Warburg Pincus, LLC and General Atlantic, LLC. SAM PR is a part of SAM Global, which is composed of 11 asset management firms operating in 12 countries. As of June 30, 2015, SAM PR managed approximately $2 billion in assets.

RATING SENSITIVITIES
The ratings may be sensitive to material changes in the credit quality or market risk profiles of the funds. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch. Changes in the supply-demand dynamics with respect to invested collateral types may influence Fitch's view of the liquidity of underlying collateral types, especially any Puerto Rico bonds in the collateral accounts. In addition, the total amount of leverage assumed by the funds could also influence Fitch's analytical conclusion if such leverage increased the likelihood of a bankruptcy stay with respect to the overall fund.