October 11, 2016 / 6:37 PM / 2 years ago

Fitch Affirms Notes Issued by 11 Santander Puerto Rico Closed-End Funds

(The following statement was released by the rating agency) NEW YORK, October 11 (Fitch) Fitch Ratings has reviewed and affirmed the ratings assigned to Medium-Term Notes and Short-Term Notes programs maintained by 11 Puerto Rico closed-end funds (CEFs) advised by Santander Asset Management, LLC (Puerto Rico). A complete list of rating actions can be found at the end of this release. KEY RATING DRIVERS The main drivers for the rating actions are: --The asset coverage requirements for each series of notes at the individual, sub-account level when notes are outstanding; --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 Santander Asset Management (Puerto Rico) as investment adviser. As of Sept. 30, 2016, none of the Santander CEFs had rated notes outstanding. As such, the rating affirmation is not driven by current asset coverage levels but by the rating drivers listed above. 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 may borrow money from banks and other financial institutions for temporary or emergency purposes in an amount not to exceed five percent of the funds' total assets. STRUCTURAL PROTECTIONS At the time of the ratings affirmations, the funds did not have any rated notes outstanding and therefore were not required to maintain asset coverage levels. When rated notes are outstanding, each fund segregates collateral for each series of 100% Principal Protected Notes (comprising a medium-term note series and a short-term note series). The Fitch overcollateralization (OC) tests calculate asset coverage available to the notes and preferred stock, based on discounted market prices and diversification of the assets in each segregated collateral account. The funds have covenanted to maintain asset coverage amounts deemed consistent with each fund's assigned ratings. Should either of the asset coverage tests decline below 100% (as tested weekly) and not cure within the pre-specified timeframe of five business days, the governing documents would require the fund to reduce leverage in an amount sufficient to restore compliance with the applicable asset coverage tests on the final day of the cure period. THE ADVISOR Santander Asset Management, LLC (SAM Puerto Rico, or SAM PR) is the funds' investment advisor and, subject to the supervision of the funds' board of directors, is responsible for the overall investment strategy and implementation. 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 and had EUR173.6 billion in assets under management as of June 30, 2016. As of June 30, 2016, SAM PR managed approximately $1.697 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 analytical approach to the liquidity of underlying collateral types. In addition, the amount of leverage assumed by the fund could also influence Fitch's analytical conclusion if such leverage increased the likelihood of a bankruptcy stay with respect to the overall fund. RATING ACTIONS First Puerto Rico AAA Target Maturity Fund I --Medium-Term Notes series affirmed at 'AA'; --Short-Term Notes series affirmed at 'F1+'. First Puerto Rico AAA Target Maturity Fund II --Medium-Term Notes series affirmed at 'AA'; --Short-Term Notes series affirmed at 'F1+'. First Puerto Rico Target Maturity Income Opportunities Fund I --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Target Maturity Income Opportunities Fund II --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Tax-Advantaged Target Maturity Fund I --Medium-Term Notes series affirmed at 'AA'; --Short-Term Notes series affirmed at 'F1+'. First Puerto Rico Tax-Advantaged Target Maturity Fund II --Medium-Term Notes series affirmed at 'AA'; --Short-Term Notes series affirmed at 'F1+'. First Puerto Rico Tax-Exempt Fund --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Tax-Exempt Target Maturity Fund II --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Tax-Exempt Target Maturity Fund III --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Tax-Exempt Target Maturity Fund IV --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. First Puerto Rico Tax-Exempt Target Maturity Fund V --Medium-Term Notes series affirmed at 'A'; --Short-Term Notes series affirmed at 'F1'. Contact: Primary Analyst Brian Knudsen Associate Director +1-646-582-4904 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Greg Fayvilevich Senior Director +1-212-908-9151 Committee Chairperson Alastair Sewell Senior Director +44-203-530-1147 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. The sources of information used to assess this rating were the public domain and Santander Asset Management, LLC (Puerto Rico). Additional information is available on www.fitchratings.com Applicable Criteria Rating Closed-End Funds and Market Value Structures (pub. 09 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1012958 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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