KBRA Assigns Ratings to Senior Notes and Mandatory Redeemable Preferred Shares Issued by Tortoise Pipeline & Energy Fund, Inc. (TTP)

Rhea-AI Summary

KBRA has assigned a rating of ‘AAA’ for the Senior Notes and ‘A+’ for the Mandatory Redeemable Preferred Shares (MRPS) of Tortoise Pipeline & Energy Fund, Inc. (NYSE: TTP). Both ratings carry a ‘Stable’ Outlook. The Fund, under the Investment Company Act of 1940, primarily invests in equity securities of pipeline companies. As of November 2022, TTP reported average senior and total asset coverage of 533% and 408%, respectively. The ratings may be influenced by changes in asset coverage driven by NAV fluctuations and any significant defaults.

Positive

• Assigned ‘AAA’ rating for Senior Notes and ‘A+’ for MRPS, indicating strong credit quality.
• Stable Outlook assigned to both ratings.
• Average senior asset coverage at 533% and total asset coverage at 408%, demonstrating robust financial health.

Negative

• Potential deterioration in asset coverage below required levels may affect ratings.
• Past breach of asset coverage in March 2020 during market volatility.

NEW YORK--(BUSINESS WIRE)-- KBRA assigns ratings of ‘AAA’ for the Senior Notes (the “Notes”) and ‘A+’ for the Mandatory Redeemable Preferred Shares (“MRPS”) issued by Tortoise Pipeline & Energy Fund, Inc. (NYSE: TTP) (“TTP” or the “Fund”). Additionally, KBRA assigns a ‘Stable’ Outlook to the Notes and MRPS.

The Fund is registered under the Investment Company Act of 1940 (the “’40 Act”) and is a closed-end investment fund sponsored by Tortoise Capital Advisors, LLC. The Fund had its Initial Public Offering in October 2011 and its shares are listed on the New York Stock Exchange under the symbol TTP. The Fund invests primarily in equity securities of pipeline companies that transport natural gas, natural gas liquids (NGLs), crude oil and refined products and, to a lesser extent, in other energy infrastructure companies.

Key Credit Considerations
The rating is driven primarily by TTP’s asset coverage, liquidity, and management experience. Since inception through November 2022, the Fund has average senior and total asset coverage of 533% and 408%. Excluding one breach of asset coverage levels in March 2020 as a result of the market volatility experienced during the height of the COVID-19 pandemic and decline in crude oil prices, TTP has remained in compliance with the 1940 Act requirements.

Rating Sensitivities
Changes in asset coverage can occur throughout the life of a transaction. These variations can often be driven by changes to the fund’s NAV, which can be due to actual or anticipated defaults and losses, as well as reassessment of the underlying asset values. The KBRA ratings process, however, incorporates a certain amount of tolerance to changes in asset coverage levels. A deterioration in asset coverage levels below ’40 Act requirements and the Fund manager’s inability to liquidate assets and demonstrate intention to cure within the allowed 30-day period could impact the current ratings.

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Related Publications

• Investment Fund Debt Global Rating Methodology

Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

This credit rating is endorsed by Kroll Bond Rating Agency Europe Limited for use in the European Union and by Kroll Bond Rating Agency UK Limited for use in the UK. Information on a credit rating’s endorsement status is available on its rating page at KBRA.com.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

There are certain issuers, entities or transactions rated by KBRA Europe or KBRA UK that may be or have relationships with Shareholders and/or Shareholder-Related Companies, as that term is defined in KBRA’s Shareholder and Shareholder Related Companies for KBRA Europe and KBRA UK Policy and Procedure. Relevant disclosure information may be found here.

About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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Analysts

Chelsea Nguyen, CFA, Director (Lead Analyst)

+1 (646) 731-1251

chelsea.nguyen@kbra.com

Lacey O’Dowd, Analyst

+1 (646) 731-1317

lacey.odowd@kbra.com

Gopal Narsimhamurthy, Managing Director (Rating Committee Chair)

+1 (646) 731-3392

gopal.narsimhamurthy@kbra.com

Business Development

Constantine Schidlovsky, Senior Director

+1 (646) 731-1338

constantine.schidlovsky@kbra.com

Source: Kroll Bond Rating Agency, LLC

FAQ

What ratings did KBRA assign to Tortoise Pipeline & Energy Fund (TTP) in December 2022?

KBRA assigned a rating of ‘AAA’ for the Senior Notes and ‘A+’ for the Mandatory Redeemable Preferred Shares (MRPS) of Tortoise Pipeline & Energy Fund (TTP).

What is the outlook for TTP's Senior Notes and MRPS ratings?

The outlook for both the Senior Notes and MRPS ratings is ‘Stable’.

What is the average asset coverage reported by TTP?

TTP reported average senior asset coverage of 533% and total asset coverage of 408% as of November 2022.

What could impact the ratings assigned to TTP by KBRA?

Changes in asset coverage driven by fluctuations in net asset value (NAV) and defaults could impact the ratings assigned to TTP.