TEXT-Fitch rates Neuberger Berman Real Estate Securities Income Fund

Fri Sep 28, 2012 5:45pm EDT

Sept 28 - Fitch Ratings assigns an 'AA' rating to the following mandatory redeemable preferred stock (MRPS) issued by Neuberger Berman Real Estate Securities Income Fund Inc. (NYSE: NRO), a non-diversified, closed-end fund advised by Neuberger Berman Management LLC (Advisor): --$25,000,000 4.00% Series A MRPS, due Sept. 26, 2017. KEY RATING DRIVERS The 'AA' rating is based on sufficient asset coverage provided to the MRPS by the fund's underlying portfolio of assets, the structural protections afforded by mandatory cure and de-leveraging provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the fund's operations and the capabilities of the advisor. DETAILS OF THE TRANSACTION The closing date for the senior notes took place on Sept. 26, 2012. By issuing the preferred shares, the fund seeks to take advantage of the current interest rate environment that the fund believes allows it to lock in an attractive fixed-rate cost of financing for a portion of its leverage for a specified period. FUND PROFILE AND LEVERAGE As of Aug. 31, 2012, the fund managed $389 million in assets, consisting of 63% in REIT common stock and 37% in REIT preferred stock. The fund continues to utilize debt financing in the form of a committed credit facility for the remainder of its leverage. The Advisor believes that in the current market environment, the combination of equity and debt leverage may help provide greater flexibility and protection to the fund. The total amount of the fund's leverage has increased slightly as a result of issuing the preferred shares. ASSET COVERAGE At the time of the issuance, the fund's asset coverage ratio for the newly issued MRPS, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), exceeded 225%, which is the minimum asset coverage required by transactional documents. Also, at the time of issuance, the fund's asset coverage ratios as calculated in accordance with Fitch's 'AA' overcollateralization (OC) tests described in Fitch's published criteria, exceeded 100%, which is also the minimum asset coverage required by transactional documents. Should the asset coverage tests for the MRPS decline below their minimum threshold amounts and are not cured in a pre-specified timeframe, the transactional documents require the funds to reposition portfolio assets or reduce leverage in a sufficient amount to restore compliance with the applicable tests. THE FUND AND INVESTMENT PHILOSOPHY The fund commenced its operations on Oct. 28, 2003. The fund's primary investment objective is high current income and its secondary investment objective is capital appreciation. The fund's investment strategy is to manage a portfolio with a broad mix of real estate securities through superior stock selection and property sector allocation. THE ADVISOR Neuberger Berman Management LLC is an indirect subsidiary of Neuberger Berman Group LLC, which is a private, independent, employee-controlled investment manager founded in 1939. The firm employed more than 1700 employees and managed $194 billion in assets across equities, fixed income, hedge funds and private equity as of June 30, 2012. RATINGS SENSITIVITY The ratings may be sensitive to material changes in the credit quality or market risk profile of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the ratings to be lowered by Fitch.(Caryn Trokie, New York Ratings Unit)

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