Fitch Ratings affirms the 'AAA' long-term ratings assigned to Variable Rate Demand Preferred Shares (VRDP shares), Variable Rate Muni Term Preferred Shares (VMTP shares), and Remarketable Variable Rate Muni Term Preferred Shares (RVMTP shares) issued by 49 closed-end funds managed by BlackRock Advisors, LLC.
Fitch also affirms the 'F1' short-term ratings assigned to 12 series of VRDP Shares issued by the funds, reflecting the ratings of the respective liquidity providers to the VRDP Shares. A complete list of the funds and the associated ratings is included at the end of this rating action commentary.
KEY RATING DRIVERS
The 'AAA' long-term ratings primarily reflect:
--Sufficient asset coverage provided to the preferred shares as calculated per the funds' over-collateralization (OC) tests;
--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the funds' operations;
The short-term ratings assigned to VRDP shares, primarily reflect:
--The credit strength of the VRDP shares' liquidity providers;
--The terms and conditions of the VRDP shares' purchase agreements.
Both the short- and long-term ratings also reflect the capabilities of BlackRock Advisors, LLC as investment advisor.
ASSET COVERAGE
As of March 31, 2013, all the funds' asset coverage ratios for total outstanding preferred shares (VRDP, VMTP and RVMTP shares), as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum asset coverage of 225% required by the funds' transaction documents (Preferred Shares Asset Coverage Test).
In the event of asset coverage declines, the funds' transaction documents will require the funds to reduce leverage in order to restore compliance with the particular test(s) breaching the required threshold(s).
STRESS TESTS
In the stress tests performed by Fitch, asset coverage available to the VRDP Shares fell below the 'AAA' threshold, and instead passed at a 'AA' rating level only under scenarios judged to be unlikely, such as an increase to the funds' issuer concentration, while simultaneously migrating the portfolios to 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds.
Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views the funds' permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AAA' rating.
VRDP LIQUIDITY
The VRDP shares benefit from a feature giving investors the right to tender the securities with a seven-day notice for remarketing. The VRDP shares are also subject to a mandatory tender for remarketing upon the occurrence of certain events, such as non-payment of dividends by the fund, among others. VRDP shares that are unsuccessfully remarketed are purchased by the liquidity provider.
The purchase of VRDP shares pursuant to the purchase agreements is unconditional and irrevocable, and as such the short-term ratings assigned to the VRDP shares are directly linked to the short-term creditworthiness of the associated liquidity providers.
The liquidity providers' obligations under the purchase agreements have scheduled termination dates. Fitch expects the purchase agreements to be subsequently extended, with terms that are substantially similar to the current purchase agreements.
The VRDP shares have a 30-year mandatory redemption date and pay an adjustable dividend rate set weekly by the remarketing agent. Should a remarketing be unsuccessful, the dividend rate will reset to a Maximum Rate defined in the transaction documents as an Applicable Spread plus an applicable percentage of the Applicable Base Rate equal to the LIBOR Rate if the Rate Period is 49 days or more or the greater of the SIFMA Municipal Swap Index and the LIBOR Rate if the Rate Period is less than 49 days.
THE FUNDS
The funds are closed-end management investment companies regulated by the Investment Company Act of 1940.
BlackRock Advisors, LLC, a subsidiary of BlackRock, Inc., is the advisor to the funds, responsible for the overall investment strategies and their implementation. BlackRock, Inc. and its affiliates had approximately $3.936 trillion of assets under management as of March 31, 2013.
RATINGS SENSITIVITY
The ratings assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the funds, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch.
The funds have the ability to assume economic leverage through derivative transactions which may not be captured by the funds' Preferred Shares Asset Coverage test or Effective Leverage Ratio. The funds currently do not engage in derivative activities for speculative purposes and do not envision engaging in material amounts of such activity in the future. Material derivative exposure in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.
For additional information about Fitch rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.
Fitch affirms the following RVMTP and VMTP ratings at 'AAA':
BlackRock Municipal Target Term Trust (NYSE: BTT)
--$750,000,000 of Series W-7 RVMTP Shares, with a liquidation preference of $5,000,000 per share, due Dec. 31, 2030
BlackRock MuniHoldings Fund, Inc. (NYSE: MHD)
--$83,700,000 of Series W-7 VMTP Shares with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Muni Intermediate Duration Fund, Inc. (NYSE: MUI)
--$287,100,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 4, 2016
BlackRock California Municipal Income Trust (NYSE: BFZ)
--$171,300,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due April 1, 2015
BlackRock New Jersey Municipal Income Trust (NYSE: BNJ)
--$59,100,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due April 1, 2015
BlackRock New York Municipal Income Trust (NYSE: BNY)
--$94,500,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due April 1, 2015
BlackRock MuniHoldings California Quality Fund, Inc. (NYSE: MUC)
--$254,000,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due April 1, 2015
BlackRock Investment Quality Municipal Trust, Inc. (NYSE: BKN)
--$125,900,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Municipal Bond Trust (NYSE: BBK)
--$79,900,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Municipal Income Investment Quality Trust (NYSE: BAF)
--$42,200,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Municipal Income Quality Trust (NYSE-MKT: BYM)
--$137,200,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Municipal Income Trust (NYSE: BFK)
--$270,800,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Municipal Income Trust II (NYSE: BLE)
--$151,300,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniHoldings Fund II, Inc. (NYSE: MUH)
--$55,000,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniHoldings Quality Fund II, Inc. (NYSE: MUE)
--$131,000,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniHoldings Quality Fund, Inc. (NYSE: MUS)
--$87,000,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniVest Fund II, Inc. (NYSE: MVT)
--$140,000,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniVest Fund, Inc. (NYSE-MKT: MVF)
--$243,800,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniYield Investment Quality Fund (NYSE: MFT)
--$56,500,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock MuniYield Quality Fund II, Inc. (NYSE: MQT)
--$116,500,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
BlackRock Strategic Municipal Trust (NYSE: BSD)
--$42,900,000 of Series W-7 VMTP Shares, with a liquidation preference of $100,000 per share, due Jan. 2, 2015
Fitch affirms the following VRDP ratings at 'AAA / F1':
BlackRock Municipal Income Investment Trust (NYSE: BBF)
--VRDP Shares, $34,200,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock New York Municipal Income Trust II (NYSE-MKT: BFY)
--VRDP Shares, $44,400,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock Municipal Bond Investment Trust (NYSE: BIE)
--VRDP Shares, $17,800,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock New York Municipal Bond Trust (NYSE: BQH)
--VRDP Shares, $22,100,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock New York Municipal Income Quality Trust (NYSE: BSE)
--VRDP Shares, $40,500,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock Muni New York Intermediate Duration Fund, Inc. (NYSE: MNE)
--VRDP Shares, $29,600,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Quality Fund, Inc. (NYSE: MQY)
--VRDP Shares, $176,600,000 of Series W-7, due Oct. 2041, with a liquidation preference of $100,000 per share
BlackRock MuniHoldings New Jersey Quality Fund, Inc. (NYSE:MUJ)
--VRDP Shares, $172,700,000 of Series W-7, due July 2041, with a liquidation preference of $100,000 per share
BlackRock MuniHoldings New York Quality Fund, Inc. (NYSE:MHN)
--VRDP Shares, $243,600,000 of Series W-7, due July 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield New Jersey Quality Fund, Inc. (NYSE:MJI)
--VRDP Shares, $64,400,000 of Series W-7, due July 2041, with a liquidation preference of $100,000 per share
BlackRock MuniHoldings Investment Quality Fund (NYSE:MFL)
--VRDP Shares, $274,600,000 of Series W-7, due July 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Fund, Inc. (NYSE:MYD)
--VRDP Shares, $251,400,000 of Series W-7, due July 2041, with a liquidation preference of $100,000 per share
Fitch affirms the following VRDP ratings at 'AAA':
Blackrock Virginia Municipal Bond Trust (NYSE MKT:BHV)
--VRDP Shares, $11,600,000 of Series W-7, due July 2042, with a liquidation preference of $100,000 per share
Blackrock Maryland Municipal Bond Trust (NYSE MKT:BZM)
--VRDP Shares, $16,000,000 of Series W-7, due July 2042, with a liquidation preference of $100,000 per share
Blackrock Pennsylvania Strategic Municipal Trust (NYSE MKT:BPS)
--VRDP Shares, $16,300,000 of Series W-7, due July 2042, with a liquidation preference of $100,000 per share
The Massachusetts Health & Education Tax-Exempt Trust (NYSE MKT:MHE)
--VRDP Shares, $18,500,000 of Series W-7, due July 2042, with a liquidation preference of $100,000 per share
Blackrock New Jersey Municipal Bond Trust (NYSE MKT:BLJ)
--VRDP Shares, $18,700,000 of Series W-7, due July 2042, with a liquidation preference of $100,000 per share
BlackRock MuniYield California Quality Fund, Inc. (NYSE:MCA)
--VRDP Shares, $166,500,000 of Series W-7, due May 2041, with a liquidation preference of $100,000 per share
BlackRock MuniEnhanced Fund, Inc. (NYSE:MEN)
--VRDP Shares, $142,500,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Michigan Quality Fund, Inc. (NYSE:MIY)
--VRDP Shares, $144,600,000 of Series W-7, due May 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Pennsylvania Quality Fund (NYSE:MPA)
--VRDP Shares, $66,300,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield California Fund, Inc. (NYSE:MYC)
--VRDP Shares, $105,900,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Investment Fund (NYSE:MYF)
--VRDP Shares, $59,400,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Quality Fund III, Inc. (NYSE:MYI)
--VRDP Shares, $356,400,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield New Jersey Fund, Inc. (NYSE:MYJ)
--VRDP Shares, $102,200,000 of Series W-7, due May 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Michigan Quality Fund II, Inc. (NYSE:MYM)
--VRDP Shares, $87,300,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield New York Quality Fund, Inc. (NYSE:MYN)
--VRDP Shares, $247,700,000 of Series W-7, due May 2041, with a liquidation preference of $100,000 per share
BlackRock MuniYield Arizona Fund, Inc. (NYSE:MZA)
--VRDP Shares, $37,300,000 of Series W-7, due June 2041, with a liquidation preference of $100,000 per share
Additional information is available at 'www.fitchratings.com'.
The sources of information used to assess this rating were the public domain and BlackRock Advisors, LLC.
To receive Fitch's forthcoming research on closed-end funds please go to:
http://forms.fitchratings.com/forms/FAMCEFOptinform
Applicable Criteria and Related Research:
--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 15, 2012);
--'2013 Outlook: Closed-End Funds' (Dec. 14, 2012);
--'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk' (Oct. 11, 2012);
--'Municipal CEFs Refinance Pre-Crisis ARPS' (May 3, 2012).
Applicable Criteria and Related Research
Rating Closed-End Fund Debt and Preferred Stock
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686101
2013 Outlook: Closed-End Funds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696831
Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=691173
Municipal CEFs Refinance Pre-Crisis ARPS
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677576
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=791116
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