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Fitch Ratings Affirms 'AA' and 'A' Long-Term Ratings for Neuberger Berman's Municipal and High-Yield Strategies Funds

Strategic Insights

— 2 min read

Fitch Ratings has affirmed the 'AA' Long-Term Rating assigned to the Series A Variable Rate Municipal Term Preferred shares (VMTP shares) issued by Neuberger Berman Municipal Fund Inc. (NBH) and the 'A' Long-Term Rating assigned to the Series D Mandatory Redeemable Preferred Shares (MRPS) issued by Neuberger Berman High Yield Strategies Fund Inc. (NHS). The ratings are supported by sufficient asset coverage, structural protections, and the capabilities of Neuberger Berman Investment Advisers LLC as the investment advisor. Both funds are diversified, closed-end management investment companies, registered under the Investment Company Act of 1940, as amended.

Key Takeaways:

  • Fitch Ratings has affirmed the 'AA' Long-Term Rating for NBH and the 'A' Long-Term Rating for NHS, citing sufficient asset coverage and structural protections.
  • The funds have asset coverage ratios above 100% and effective leverage ratios below 50% and 45%, respectively, exceeding the minimum asset coverage thresholds.
  • The funds have the ability to cure breaches of the capital structure's structural protections by altering the portfolio composition or reducing leverage.
  • The investment manager, Neuberger Berman Investment Advisers LLC, is an indirect subsidiary of Neuberger Berman Group LLC, a private, independent, employee-controlled investment manager founded in 1939.
  • The ratings may be sensitive to material changes in the leverage composition, portfolio credit quality, or market risk of the fund's assets.
  • The funds could withstand a market value decline of 8% and 49% before breaching Fitch's OC Test results at the assigned rating levels.
  • The funds have the ability to assume economic leverage through derivative transactions, which may impact asset coverage available for rated securities.
  • The principal sources of information used in the analysis are the public domain and Neuberger Berman.

Statistics:

  • As of June 30, 2025, NBH's leverage is composed of $227.9 million of rated Series A VMTP shares, resulting in an effective leverage ratio of approximately 42%.
  • As of June 30, 2025, NHS's leverage consisted of $40 million of Fitch-rated Series D MRPS and amounts drawn under the margin loan agreement, with an effective leverage ratio of 28%.
  • As of the review date, the funds' asset coverage ratios exceeded the minimum required thresholds: NBH's 225% and NHS's 225% and 100% for total outstanding preferred shares and MRPS, respectively.
  • The funds' effective leverage ratios were below the maximum allowed thresholds: NBH's 50% and NHS's 45%.

Sources:

  • Fitch Ratings
  • Neuberger Berman Investment Advisers LLC
  • Neuberger Berman Group LLC
  • The Investment Company Act of 1940, as amended

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