TEXT - Fitch affirms closed-end funds managed by KA Fund Advisors

Tue Feb 26, 2013 10:33am EST

Feb 26 - Fitch Ratings has affirmed the 'AAA' ratings assigned to the senior
unsecured notes and the 'AA' ratings assigned to the mandatory redeemable
preferred stock (MRPS) issued by the following closed-end funds managed by KA
Fund Advisors, LLC: 

--Kayne Anderson Energy Total Return Fund, Inc. (NYSE: KYE)
--Kayne Anderson MLP Investment Company (NYSE: KYN), 
--Kayne Anderson Midstream/Energy Fund, Inc. (NYSE: KMF).

A full list of ratings follows at the end of this release.

KEY RATING DRIVERS

--Sufficient asset coverage relative to Fitch's published criteria

--The structural protections afforded by mandatory de-leveraging provisions in 
the event of asset coverage declines

--The legal and regulatory parameters that govern the fund's operations

--The capabilities of KA Fund Advisors, LLC as investment advisor. As of Jan. 
31, 2013, the funds' total assets were approximately $7,281 million. 

LEVERAGE

As of Jan. 31, 2012, KYE leverage was $393 million, not including accrued 
interest, or 28.1% of the total assets, which stood at $1,396.9 million. The 
leverage comprised $273 million of senior unsecured notes and $120 million of 
MRPS. 

As of the same date, KYN leverage was $1,342 million, not including accrued 
interest, or 27.3% of the total assets, which stood at $4,919.6 million. The 
leverage comprised $890 million of senior unsecured notes, $374 million of MRPS,
and $78 million of bank borrowing.

KMF leverage was $250 million, not including accrued interest, or 25.9% of the 
total assets, which stood at $964.5 million. The leverage comprised $165 million
of senior unsecured notes, $65 million of MRPS, and $20 million of bank 
borrowing.

ASSET COVERAGE

At the time of the rating affirmations, the funds' asset coverage ratios 
applicable to the senior unsecured notes, as calculated in accordance with the 
Investment Company Act of 1940 (1940 Act), were in excess of 300%, which is the 
minimum asset coverage required by the 1940 Act with respect to debt. The funds'
asset coverage ratios, as calculated in accordance with the Fitch 
overcollateralization (OC) test per the 'AAA' rating criteria were in excess of 
100%, which is the minimum asset coverage deemed consistent with the ratings 
assigned to the notes. 

In addition, the funds' asset coverage ratios for MRPS, as calculated in 
accordance with the Investment Company Act of 1940, was in excess of 200%, which
is the minimum asset coverage level required by the 1940 Act with respect to 
preferred stock. The funds' asset coverage ratios, as calculated in accordance 
with the Fitch OC test per the 'AA' rating criteria were in excess of 100%, 
which is the minimum asset coverage deemed consistent with the ratings assigned 
to preferred stock. 

THE FUNDS

KYE is a non-diversified, closed-end fund, which commenced its operations on 
June 28, 2005. The fund's investment objective is to obtain a high level of 
total return with an emphasis on current income. The fund seeks to achieve that 
investment objective by investing principally in equity and debt securities of 
companies in the energy industry, such as energy related master limited 
partnerships (MLPs), U.S. and Canadian income trusts, marine transportation 
companies, midstream companies and coal companies. 

KYN is a non-diversified, closed-end fund, which commenced its operations on 
Sept. 28, 2004. The fund's objective is to obtain high after tax total returns 
for its shareholders. The fund invests principally in equity securities of 
energy-related publicly traded MLPs. 

As of Jan. 31, 2013, the fund incurred a deferred tax liability in the amount of
$809.2 million. Under a stressed market scenario, the fund may have to liquidate
portfolio assets to restore its asset coverage ratios. If such a scenario 
occurred, any currently existing unrealized gain would likely be eliminated or 
significantly reduced as a result of asset price declines causing such 
liquidation. Nonetheless, Fitch rating criteria expect the fund to account 10% 
of the deferred tax liability as current liability for the purpose of 
calculating OC coverage for both senior unsecured notes and MRPS.

KMF is a non-diversified, closed-end fund, which commenced its operations on 
Nov. 24, 2010. The fund's investment objective is to provide a high level of 
total return with an emphasis on making quarterly cash distributions to its 
common stockholders. The fund seeks to achieve that investment objective by 
investing at least 80% of its total assets in the securities of companies in the
Midstream/Energy Sector, consisting of midstream MLPs, midstream companies, 
other MLPs and other energy companies.

THE ADVISOR

KA Fund Advisors, LLC is the fund's investment adviser, responsible for 
implementing and administering the fund's investment strategy. It is a 
subsidiary of Kayne Anderson Capital Advisors, L.P. (Kayne Anderson) a 
Securities and Exchange Commission-registered investment adviser. As of Dec. 31,
2012 Kayne Anderson and its affiliates managed approximately $18 billion, 
including over $15 billion in the Midstream/Energy Sector. Kayne Anderson has 
invested in MLPs and other midstream energy companies since 1998. 

RATINGS SENSITIVITIES

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. Given the 
funds' primary investment focus on the energy infrastructure sector, the fund 
ratings may also be sensitive to adverse changes in the economic conditions of 
the sector.

Fitch affirms the following ratings:

Kayne Anderson Energy Total Return Fund, Inc 

--$128,000,000 series C 6.06% senior unsecured notes due on Aug. 13, 2013 at 
'AAA';

--$58,000,000 series D 4.15% senior unsecured notes due on Mar. 5, 2015 at 
'AAA';

--$27,000,000 series E 3-month LIBOR + 155 bps senior unsecured notes due on 
Mar. 5, 2015 at 'AAA';

--$30,000,000 series F 3-month LIBOR + 145 bps senior unsecured notes due on May
10, 2016 at 'AAA';

--$20,000,000 series G 3.71% senior unsecured notes due on May 10, 2016 at 
'AAA';

--$10,000,000 series H 4.38% senior unsecured notes due on May 10, 2018 at 
'AAA';

--$90,000,000 series A 5.48% MRPS due on Mar. 5, 2017 at 'AA';

--$30,000,000 series B 5.13% MRPS due on May 10, 2018 at 'AA'.

Kayne Anderson MLP Investment Company

--$125,000,000 series K 5.991% senior unsecured notes due on Jun. 19, 2013 at 
'AAA';

--$60,000,000 series M 4.56% senior unsecured notes due on Nov. 4, 2014 at 
'AAA';

--$50,000,000 series N 3-month LIBOR + 185 bps senior unsecured notes due on 
Nov. 4, 2014 at 'AAA';

--$65,000,000 series O 4.21% senior unsecured notes due on May 7, 2015 at 'AAA';

--$45,000,000 series P 3-month LIBOR + 160 bps senior unsecured notes due on May
7, 2015 at 'AAA';

--$15,000,000 series Q 3.23% senior unsecured notes due on Nov. 9, 2015 at 
'AAA';

--$25,000,000 series R 3.73% senior unsecured notes due on Nov. 9, 2017 at 
'AAA';

--$60,000,000 series S 4.4% senior unsecured notes due on Nov. 9, 2020 at 'AAA';

--$40,000,000 series T 4.5% senior unsecured notes due on Nov. 9, 2022 at 'AAA';

--$60,000,000 series U 3-month LIBOR + 145 bps senior unsecured notes due on May
26, 2016 at 'AAA';

--$70,000,000 series V 3.71% senior unsecured notes due on May 26, 2016 at 
'AAA';

--$100,000,000 series W 4.38% senior unsecured notes due on May 26, 2018 at 
'AAA'; 

--$14,000,000 series X 2.46% senior unsecured notes due on May 3, 2015 at 'AAA';

--$20,000,000 series Y 2.91% senior unsecured notes due on May 3, 2017 at 'AAA';

--$15,000,000 series Z 3.39% senior unsecured notes due on May 3, 2019 at 'AAA';

--$15,000,000 series AA 3.56% senior unsecured notes due on May 3, 2020 at 
'AAA';

--$35,000,000 series BB 3.77% senior unsecured notes due on May 3, 2021 at 
'AAA';

--$76,000,000 series CC 3.95% senior unsecured notes due on May 3, 2022 at 
'AAA';

--$104,000,000 series A 5.57% MRPS due on May 7, 2017 at 'AA';

--$8,000,000 series B 4.53% MRPS due on Nov. 9, 2017 at 'AA';

--$42,000,000 series C 5.20% MRPS due on Nov. 9, 2020 at 'AA';

--$100,000,000 series D 4.95% MRPS due on Jun. 1, 2018 at 'AA';

--$120,000,000 series E 4.25% MRPS due on Apr. 1, 2019 at 'AA'.

Kayne Anderson Midstream/Energy Fund, Inc.

--$55,000,000 series A 3.93% senior unsecured notes due on Mar. 3, 2016 at 
'AAA';

--$60,000,000 series B 4.62% senior unsecured notes due on Mar. 3, 2018 at 
'AAA';

--$50,000,000 series C 4.00% senior unsecured notes due on Mar. 22, 2022 at 
'AAA'.

--$35,000,000 series A 5.32% MRPS due on Mar. 3, 2018 at 'AA'; 

--$30,000,000 series B 4.50% MRPS due on Mar. 22, 2020 at 'AA'.
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