OREANDA-NEWS. Fitch Ratings has downgraded to 'A' from 'AA' the ratings assigned to mandatory redeemable preferred stock (MRPS) issued by four closed-end funds (CEFs) managed by KA Fund Advisors LLC. - Kayne Anderson MLP Investment Company (NYSE: KYN), Kayne Anderson Energy Total Return Fund (NYSE: KYE), Kayne Anderson Midstream/Energy Fund (NYSE: KMF), and Kayne Anderson Energy Development Company (NYSE: KED).

Fitch also affirms the existing 'AAA' ratings assigned to senior notes issued by the same four funds and marks certain notes and MRPS issued by the funds as paid in full. A complete list of rated notes and MRPS follows at the end of this press release.

RATING RATIONALE
The downgrades of the MRPS issued by the funds to 'A' reflects the sharp selloff in the funds' energy-related investments which has put pressure on the MRPS' asset coverage as measured by the Fitch Total Overcollateralization tests. The funds' portfolios are more concentrated at the individual issuer level, compared with other CEFS in this sector, which encumbers their ability to maintain robust asset coverage at the 'AA' level under Fitch's criteria. The funds have been actively and successfully deleveraged by reducing more flexible bank borrowings (in some cases leaving no amounts outstanding). As a result, the capital structure now is oriented more toward the MRPS. The structural protections that require mandatory redemption of the MRPS are in line with Fitch's criteria at the 'A' rating level given current leverage, leverage composition, portfolio concentration and the potential for further volatility of master limited partnership (MLP) holdings.

The affirmation of the notes at 'AAA' reflects the continued asset coverage in excess of Fitch's criteria, after taking into consideration the funds' concentrated portfolios. The notes have benefited from the deleveraging, which has created cushion against further price declines in portfolio holdings.

KEY RATING DRIVERS
The rating downgrades and affirmations reflect:

--Recent declines in asset coverage for the MRPS as calculated per the fund's asset coverage tests;
--Continued weakness in commodity prices and selloffs in related energy assets;
--The structural protections afforded by mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the fund's operations;
--The capabilities of KA Fund Advisors, LLC as investment advisor.

FUND PROFILES
KYN is a non-diversified, closed-end fund, which commenced operations on Sept. 28, 2004. KYN invests principally in equity securities of energy-related MLP. KYN's objective is to obtain high after-tax total returns for its shareholders. MLPs are publicly traded limited partnerships. Energy-related MLPs own domestic infrastructure assets that are used in the gathering, processing, transportation, storage, refining and distribution of energy-related commodities.

KED is a non-diversified, closed-end fund, which commenced operations on Sept. 21, 2006. The fund's investment objective is to obtain a high level of total return with an emphasis on current income. The fund seeks to achieve that investment objective by investing principally in equity and debt securities of companies in the energy industry, such as energy related MLPs, midstream companies and marine transportation companies.

KMF is a non-diversified, closed-end fund, which commenced operations on Nov. 24, 2010. The fund's investment objective is to provide a high level of total return with an emphasis on making quarterly cash distributions to its common stockholders. The fund seeks to achieve that investment objective by investing at least 80% of its total assets in the securities of companies in the Midstream/Energy Sector, consisting of midstream MLPs, midstream companies, other MLPs and other energy companies.

KYE is a non-diversified, closed-end fund, which commenced operations on June 28, 2005. The fund's investment objective is to obtain a high level of total return with an emphasis on current income. The fund seeks to achieve that investment objective by investing principally in equity and debt securities of companies in the energy industry, such as energy related MLPs, U.S. and Canadian income trusts, marine transportation companies, midstream companies and coal companies.

LEVERAGE
As of Nov. 30, 2015, KYN's total assets were approximately $4.1 billion with senior securities totalling $1.03 billion of notes, no balance on the fund's revolving credit facilities (RCFs) and $464 million of MRPS. The notes and credit facilities are both unsecured and rank pari passu in the fund's capital structure - both senior to the fund's MRPS.

As of Nov. 30, 2015, KYE's total assets were approximately $834 million with senior securities totalling $230 million of notes, no balance on the fund's RCFs and $120 million of MRPS. The notes and credit facilities are both unsecured and rank pari passu in the fund's capital structure - both senior to the fund's MRPS.

As of Nov. 30, 2015, KMF's total assets were approximately $640 million with senior securities totalling $185 million of notes, no balance on the fund's RCFs and $70 million of MRPS. The notes and credit facility are both unsecured and rank pari passu in the fund's capital structure - both senior to the fund's MRPS.

As of Nov. 30, 2015, KED's total assets were approximately $304 million with $71 million drawn on the balance of the fund's RCF and $25 million of MRPS. The credit facility is both unsecured and ranks senior to the fund's MRPS in the capital structure.

Amounts above do not include defeased notes and preferred stock.

ASSET COVERAGE
As of Nov. 30, 2015, the funds' pro forma asset coverage ratios, as calculated in accordance with the Fitch total and net overcollateralization tests (Fitch OC tests) per the 'AAA' rating guidelines for the notes and the 'A' rating guidelines for the MRPS, outlined in Fitch's closed-end fund criteria, were in excess of 100%. These are the minimum asset coverage guideline required by the fund's governing documents. Additionally, Fitch performed further stress testing of the fund's asset values to reflect recent volatility, and found asset coverage tests remained in compliance.

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 stress level that corresponds to the assigned rating. In the case of these funds, the sizable issuer concentrations in excess of Fitch's diversification criteria received no credit in Fitch asset coverage calculations, in accordance with criteria.

As of Nov. 30, 2015, the funds' asset coverage ratio for the notes, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), was in excess of 300%. The fund's pro forma asset coverage ratio for total leverage, including the MRPS, as calculated in accordance with the 1940 Act, was in excess of 225%. These are the minimum asset coverage ratios required by the legal documents of the notes and MRPS.

NOTES STRUCTURAL PROTECTIONS
Should the asset coverage tests decline below their minimum threshold amounts (as tested on the last business day of each week for Fitch OC Tests and on the last business day of each month for 1940 Act tests), under the terms of the notes, the fund is required to deliver notice to the note purchasers within five business days. The fund is then expected to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC Tests breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC tests and the 1940 Act test breaches) within a pre-specified time period (a maximum of 47 calendar days for the Fitch OC tests and a longer period for the 1940 Act test).

Failure to cure an asset coverage breach as described above is an Event of Default under the terms of the notes. The fund must then deliver a notice within five business days to the note purchasers and all notes outstanding and any accrued interest is immediately due and payable if a majority of noteholders vote for acceleration.

The fund is also prohibited from paying out a common stock dividend if it fails to cure a breach to the notes' 300% 1940 Act asset coverage test. Fitch views this as an added incentive to cure and deleverage in a timely manner, regardless of acceleration by the notes purchasers.

PARI PASSU CLAIM WITH CREDIT FACILITY
Upon the occurrence of an Event of Default per the Note Purchase Agreement (such as a failure to cure an asset coverage breach) or per the fund's Credit Agreement, the noteholders and the bank lender will share in their claim on fund assets pari passu when receiving payments as described in each of those agreements. The fund accounts for this pari passu status in their calculation of the Fitch OC tests.

MRPS STRUCTURAL PROTECTIONS
Should the MRPS Asset Coverage Test and Fitch OC test decline below their minimum threshold amounts (as tested weekly for Fitch OC Tests and monthly for 1940 Act tests) the fund is required to deliver notice to the MRPS purchasers within five days of becoming aware of such fact.

The fund manager is required to cure the breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC tests breaches), or by reducing leverage in a sufficient amount (for both the Fitch OC tests and Asset Coverage Test breaches) within a pre-specified time period (a maximum of 47 calendar days and a longer period for the Asset Coverage Test).

THE ADVISOR
KA Fund Advisors, LLC is the funds' investment adviser, responsible for implementing and administering the fund's investment strategy and is a subsidiary of Kayne Anderson Capital Advisors, L.P. (Kayne Anderson) a Securities and Exchange Commission-registered investment adviser. As of Sept. 30, 2015, Kayne Anderson and its affiliates managed over $22 billion in assets, including over $17 billion in the energy sector. Kayne Anderson has invested in MLPs and other midstream energy companies since 1998.

RATING SENSITIVITIES
The ratings are based on the terms stipulating mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines.

In the case of the rated notes, should the fund fail to cure an asset coverage breach, or the note purchasers not declare the notes due and payable upon an event of default, this may lengthen exposure to market value risk and cause the ratings to be lowered by Fitch. Furthermore, significant deleveraging of MRPS could cause a reduction of OC to the notes, which may introduce rating volatility to the notes especially if portfolio concentration increases and/or MLP performance continues to be negative.

The common stock of MLP companies continues to be volatile, causing the value of the funds' portfolio holding to decline. Thus far market volatility has not hindered the fund's ability to liquidate investments to reduce or defease leverage. However, increased volatility that is higher than the stressed volatility used to evaluate the MLP sector in Fitch's CEF ratings criteria, or significant changes to market liquidity of MLP common stock may cause Fitch to re-evaluate criteria for the MLP asset class.

Furthermore, additional consolidation of MLP companies may cause further pressure to the funds' Fitch OC tests as issuer concentration increases. Fitch will continue to monitor the performance of the funds in light of continuing pressure on the broader energy sector.

In general, the ratings may be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.

RATING ACTIONS
Fitch takes the following rating actions:

Kayne Anderson MLP Investment Company (KYN)
-- $104,000,000 series A 5.57% MRPS due on May 7, 2017 downgraded to 'A' from 'AA';
-- $8,000,000 series B 4.53% MRPS due on Nov. 9, 2017 downgraded to 'A' from 'AA';
-- $42,000,000 series C 5.20% MRPS due on Nov. 9 2020 downgraded to 'A' from 'AA';
-- $120,000,000 series E 4.25% MRPS due on Apr. 1, 2019 downgraded to 'A' from 'AA';
-- $125,000,000 series F 3.50% MRPS due on Apr. 15, 2020 downgraded to 'A' from 'AA';
-- $50,000,000 series G 4.60% MRPS due on Oct. 1, 2021 downgraded to 'A' from 'AA';
-- $50,000,000 series H 4.06% MRPS due on Jul. 30, 2021 downgraded to 'A' from 'AA';
-- $25,000,000 series I 3.86% MRPS due on Oct. 29, 2022 downgraded to 'A' from 'AA';
-- $25,000,000 series R 3.73% notes due on Nov. 9, 2017 affirmed at 'AAA';
-- $60,000,000 series S 4.40% notes due on Nov. 9, 2020 affirmed at 'AAA';
-- $40,000,000 series T 4.50% notes due on Nov. 9, 2022 affirmed at 'AAA';
-- $70,000,000 series V 3.71% notes due on May 26, 2016 affirmed at 'AAA';
-- $100,000,000 series W 4.38% notes due on May 26, 2018 affirmed at 'AAA';
-- $20,000,000 series Y 2.91% notes due on May 3, 2017 affirmed at 'AAA';
-- $15,000,000 series Z 3.39% notes due on May 3, 2019 affirmed at 'AAA';
-- $15,000,000 series AA 3.56% notes due on May 3, 2020 affirmed at 'AAA';
-- $35,000,000 series BB 3.77% notes due on May 3, 2021 affirmed at 'AAA';
-- $76,000,000 series CC 3.95% notes due on May 3, 2022 affirmed at 'AAA';
-- $75,000,000 series DD 2.74% notes due on Apr. 16, 2019 affirmed at 'AAA';
-- $50,000,000 series EE 3.20% notes due on Apr. 16, 2021 affirmed at 'AAA';
-- $65,000,000 series FF 3.57% notes due on Apr. 16, 2023 affirmed at 'AAA';
-- $45,000,000 series GG 3.67% notes due on Apr. 16, 2025 affirmed at 'AAA';
-- $30,000,000 series II 2.88% notes due on Jul. 30, 2019 affirmed at 'AAA';
-- $30,000,000 series JJ 3.46% notes due on Jul. 30, 2021 affirmed at 'AAA';
-- $80,000,000 series KK 3.93% notes due on Jul. 30, 2024 affirmed at 'AAA';
-- $50,000,000 series LL 2.89% notes due on Oct. 29, 2020 affirmed at 'AAA';
-- $40,000,000 series MM 3.26% notes due on Oct. 29, 2022 affirmed at 'AAA';
-- $20,000,000 series NN 3.37% notes due on Oct. 29, 2023 affirmed at 'AAA';
-- $90,000,000 series OO 3.46% notes due on Oct. 29, 2024 affirmed at 'AAA'.

Kayne Anderson Energy Total Return Fund (KYE)
-- $90,000,000 series A 5.48% MRPS due on Apr. 5, 2017 downgraded to 'A' from 'AA';
-- $30,000,000 series B 5.13% MRPS due on May 10, 2018 downgraded to 'A' from 'AA';
-- $20,000,000 series G 3.71% notes due on May 10, 2016 affirmed at 'AAA';
-- $10,000,000 series H 4.38% notes due on May 10, 2018 affirmed at 'AAA';
-- $6,000,000 series I 2.59% notes due on Aug. 8, 2018 affirmed at 'AAA';
-- $29,000,000 series J 3.07% notes due on Aug. 8, 2020 affirmed at 'AAA';
-- $50,000,000 series K 3.72% notes due on Aug. 8, 2023 affirmed at 'AAA';
-- $45,000,000 series L 3.82% notes due on Aug. 8, 2025 affirmed at 'AAA';
-- $70,000,000 series M 3.36 notes due on Oct. 7, 2021 affirmed at 'AAA'.

Kayne Anderson Midstream/Energy Fund (KMF)
-- $35,000,000 series A 5.32% MRPS due on Mar. 3, 2018 marked as 'Paid In Full';
-- $30,000,000 series B 4.50% MRPS due on Mar. 22, 2020 downgraded to 'A' from 'AA';
-- $40,000,000 series C 4.06% MRPS due on Jul. 30, 2021 downgraded to 'A' from 'AA';
-- $55,000,000 series A 3.93% notes due on Mar. 3, 2016 affirmed at 'AAA';
-- $60,000,000 series B 4.62% notes due on Mar. 3, 2018 affirmed at 'AAA';
-- $50,000,000 series C 4.00% notes due on Mar. 22, 2022 affirmed at 'AAA';
-- $40,000,000 series D 3.34% notes due on May 1, 2023 affirmed at 'AAA';
-- $30,000,000 series E 3.46% notes due on Jul. 30, 2021 affirmed at 'AAA'.

Kayne Anderson Energy Development Company (KED)
-- $25,000,000 series A 3.37% MRPS due on Apr. 10, 2020 downgraded to 'A' from 'AA'.

In addition, Fitch expects that the below notes will be paid in full on their respective dates and will be marked as paid in full at that time;

Kayne Anderson MLP Investment Company (KYN)
--$70,000,000 series V 3.71% notes due on May 26, 2016 to be paid in full on Feb. 26, 2016.

Kayne Anderson Energy Total Return Fund (KYE)
-- $10,000,000 series H 4.38% notes due on May 10, 2018 to be paid in full on Dec. 28, 2015.

Kayne Anderson Midstream/Energy Fund (KMF)
-- $55,000,000 series A 3.93% notes due on March 3, 2016 to be paid in full on Dec. 28, 2015.