Federated Municipal Closed-End Funds Announce Tender-Option Bond Refinancing for...

Federated Municipal Closed-End Funds Announce Tender-Option Bond Refinancing
for Preferred Shares

PITTSBURGH, Aug. 5 /PRNewswire-FirstCall/ -- Federated Investors, Inc.,
(NYSE: FII) one of the nation's largest investment managers, today announced
that the Board of Trustees for Federated Premier Municipal Income Fund
(NYSE: FMN) and Federated Premier Intermediate Municipal Income Fund
(NYSE: FPT) approved a plan to refinance a portion of each fund's
auction-market preferred shares (AMPS). The Board approved a change in the
funds' investment policies that allows each fund to invest in inverse floaters
of tender-option bonds (TOB) enabling the funds to redeem a portion of their
outstanding AMPS.
The actual amount of AMPS to be redeemed will be determined based on a
number of factors including the availability and cost of TOB financing, the
impact of TOB transactions on fund income available to common shareholders,
portfolio structure and risk management considerations and the potential for
other suitable leverage alternatives. Federated expects to announce
additional details, including redemption dates and amounts, in August.
A TOB is a special purpose trust into which the funds will deposit one or
more tax-exempt obligations. The TOB issues two classes of securities:
floater certificates, which pay a rate of interest reset periodically based on
a short-term municipal benchmark; and inverse floaters, which pay the
difference between the interest paid on the underlying obligations and the
interest paid to floater certificate holders, less TOB program expenses. The
funds intend to retain the inverse floaters and to use the proceeds of the
sale of the floater certificates to redeem a portion of their outstanding
AMPS.
The funds' advisor and the Board believe the implementation of the TOB
transactions and the partial redemption of the outstanding AMPS are in the
best interests of both the common and preferred shareholders of the funds.
The funds' advisor continues to believe that leverage is a valuable strategy
in seeking to enhance potential returns to common shareholders. It expects
that the cost to each fund for the TOB financing will be lower over time than
the cost of an equivalent dollar amount of AMPS. AMPS dividends are currently
being paid at maximum applicable rates, while TOB financing is expected to be
available at lower rates. Partial redemption of AMPS is in the interest of
the preferred shareholders because they are currently unable to liquidate
their shares due to insufficient demand at weekly auctions.
The AMPS will be redeemed at $25,000 per share, plus the amount of
accumulated, but unpaid, dividends as of the redemption date. When the funds
initiate the partial redemption of AMPS their advisor will notify Cede & Co.,
the recordholder for each of the AMPS, as nominee of the Depository Trust
Company (DTC). The partial redemption of AMPS will be made to the
recordholder on a pro-rata basis. DTC will conduct an impartial lottery to
determine the allocation of redemptions among broker-dealer firms and each
participant broker-dealer will in turn determine how redeemed AMPS are
allocated among its underlying beneficial owners. Allocation procedures among
different broker dealers may vary and the Board and the advisor have no
control over the allocation process of DTC or the broker-dealers. As a
result, beneficial owners of AMPS will not be redeemed on a strictly pro-rata
basis; certain AMPS beneficial owners may have a higher percentage of their
AMPS redeemed than others, and certain AMPS beneficial owners may not have any
AMPS redeemed.
TOBs are a part of a more comprehensive solution being explored by the
funds' advisor and the Board for the shareholders of FMN and FPT. Federated,
like other closed-end fund managers, is continuing to pursue the development
of a new security with a demand feature from an independent, highly rated
liquidity provider. The new security, if developed, would be designed to be
eligible for purchase by money market funds. Should the new security become
feasible at reasonable cost, its issuance may offer opportunities to redeem
additional AMPS in the future. Ultimately, the source of leverage for each
fund may include TOBs and/or the new security, depending on cost and market
conditions.
Federated Investors, Inc. is one of the largest investment managers in the
United States, managing $333.5 billion in assets as of June 30, 2008. With 147
mutual funds and various separately managed account options, Federated
provides comprehensive investment management to more than 5,400 institutions
and intermediaries including corporations, government entities, insurance
companies, foundations and endowments, banks and broker-dealers. For more
information, visit http://FederatedInvestors.com.
Certain statements in this press release, such as those related to the
refinancing of AMPS, the timing of the release of additional information, the
use of tender-option bonds and leverage, the costs associated with tender-
option bond refinancing and the development of a replacement for preferred
shares constitute forward-looking statements, which involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
levels of activity, performance or achievements of the company, or industry
results, to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such forward-
looking statements. Among other risks and uncertainties are the ability of
the company to redeem AMPS, delays in the release of additional information,
the ability to successfully utilize tender-option bonds and leverage, the
possibility that costs associated with the TOB financing are higher than
expected, and the ability of the company to develop a replacement for
preferred shares and the risk factors discussed in the company's annual and
quarterly reports as filed with the United States Securities and Exchange
Commission. As a result, no assurance can be given as to future results,
levels of activity, performance or achievements, and neither the company nor
any other person assumes responsibility for the accuracy and completeness of
such statements in the future.
SOURCE Federated Investors, Inc.

Meghan McAndrew, +1-412-288-8103, mmcandrew@federatedinv.com, or Ed Costello,
+1-412-288-7538, ecostello@federatedinv.com, both of Federated Investors