Correspondence 0001193125-24-083315 from Nuveen Municipal Credit Income Fund (NZF) (CIK 0001137887) (NZF)
Nuveen Municipal Credit Income Fund (NZF) (CIK 0001137887)
Date: April 1, 2024 · CIK: 0001137887 · Accession: 0001193125-24-083315
AI Filing Summary & Sentiment
File numbers found in text: 811-05120, 811-05488, 811-05642, 811-07484, 811-07490, 811-07616, 811-09297, 811-09475, 811-10345, 811-21137, 811-21213, 811-21293, 811-21333, 811-21449, 811-21494, 811-22253, 811-22699, 811-22967, 811-23198, 811-23440, 811-23445, 811-23489, 811-23669, 811-23704
Letter
VIA EDGAR Division of Investment Management, Disclosure Review & Accounting Office U.S. Securities and Exchange Commission F Street, NE Washington, DC 20549 Re: Nuveen Closed-End Funds – Sarbanes Oxley Review
Dear Mr. Kernan:
This letter addresses the comments you provided in a telephone discussion on February 14, 2024, regarding reviews performed by the staff of the U.S. Securities and Exchange Commission (the “SEC Staff”) of certain regulatory filings made by our clients, the Nuveen closed-end registered investment companies listed on Appendix A, attached hereto (each, a “Fund” or “Registrant” and, collectively, the “Funds” or “Registrants”), each of which is advised by Nuveen Fund Advisors, LLC (the “Adviser”). Each comment is shown below followed by management’s response.
1. Comment: In response to Item B.20 of Form N-CEN, filed for the period ended July 31, 2023, the Nuveen Floating Rate Income Fund (”JFR”) reported a material change in method of valuation impacting CMBS, CMOs and CLOs. In correspondence, please explain the nature of the changes, the reasons for making them and the omission of disclosure of the same pursuant to ASC 820-10-50-2.
Response: As part of an initiative to implement a single valuation policy for both the Nuveen and TIAA-CREF Fund complexes (collectively, the “Complexes”), the Adviser reviewed the pricing conventions used by asset class given that different valuation techniques had been used historically for certain asset classes within the Complexes.
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
United States
+1.202.739.3000
+1.202.739.3001
Mr. John Kernan, Esq.
April 1,
Page
The Adviser determined that mid pricing was more consistent with historical transaction prices, reflected a more precise measure of estimate and was more representative of fair value for CMBS, CMOs and CLOs. Accordingly, effective September 1, 2022, the Adviser determined to change from a bid to mid pricing convention for CMBS, CMOs and CLOs. This change was applied prospectively consistent with accounting guidance under ASC 820-10-35-25 and ASC 820-10-35-26.
In preparing the Funds’ financial statements, including those of JFR, the Adviser considered the requirements of ASC 250-10-50-5, and determined that disclosure for the change in valuation technique from a bid to mid pricing convention for CMBS, CMOs and CLOs was not required. The Adviser also considered the requirements of ASC 820-10-50-2 and determined that the change in valuation technique, and the reasons for making the change, were not material to the Funds’ financial statements and therefore did not require disclosure for the following reasons:
•
As of the periods ended July 31, 2022, and September 1, 2022, a change from bid to mid pricing convention for CMBS, CMOs and CLOs was deemed immaterial to the NAV of JFR, as well as the NAVs of the other Funds, and therefore the Adviser concluded that the change in valuation technique was not required per ASC 820-10-50-2.
•
The valuation disclosure within the Notes to Financial Statements does not describe in detail the valuation techniques used for individual securities or sub-asset types as there is expected to be some variability depending on the facts and circumstances relevant for individual securities, but rather discloses the overall valuation methodology and factors considered in how fair value estimates are determined.
•
The inputs and assumptions of such valuation techniques used in determining both the bid and mid prices for securities are substantially the same and the use of both bid and mid pricing conventions is reasonable for determining the fair value of these securities held in JFR, as well as the other Funds, which have been applied consistently.
•
The use of bid or mid pricing conventions is but one factor considered by the Adviser when determining the fair value of securities. Other considerations include but are not limited to: the pricing services used by the Fund, price exception reviews including price tolerance reports comparing the current day’s price with the prior day’s price, acid test reports comparing executed trade levels with the pricing vendor’s price, price comparison reports comparing the primary pricing vendor’s price with that of secondary or alternative pricing vendors, and unchanged price reports, for example.
Mr. John Kernan, Esq.
April 1,
Page
For the reasons set forth above, the Adviser’s response to Item B.20 of Form N-CEN should have been “No” with respect to JFR, as well as the other Funds.
2. Comment: The SEC Staff notes that disclosure included in the Notes to Financial Statements titled “6. Fund Shares” states that the fair value of JFR’s Taxable Fund Preferred Shares (“TFPs”) while in Variable Rate Mode (“VRM”) are expected to approximate their liquidation preference. Please describe the impact of heightened interest rate and spread volatility on the fair value of TFPs during the fiscal year ended July 31, 2023. In your response, please (a) describe the valuation procedures undertaken to assess the fair value of the TFPs and provide the results in dollars of the Adviser’s determination of the fair value of the TFPs as of January 31, 2023, and July 31, 2023, and (b) explain the omission of disclosure required by ASC 820-10-50-2E, which is applicable to assets and liabilities not measured at fair value in the Statement of Assets and Liabilities but for which fair value is disclosed, and includes disclosure of leveling valuation techniques and inputs.
Response: TFPs while in VRM (“TFP-VRM”) are variable rate securities that pay a monthly dividend which is determined by a fixed spread (e.g., 1.00%) plus a short-term index (i.e., Secured Overnight Financing Rate (SOFR)). The “holding or commitment period” of a TFP-VRM is typically very short. The holding period is initially two years and eventually converts to a 60-day Evergreen tenor, meaning so long as either party does not initiate a tenor maturity date, the period will reset to a constant 60 days each day.
The Adviser determined that fair value of a TFP-VRM is equivalent to the liquidation preference of a TFP-VRM for the following reasons:
•
Variable rate: The variable rate on the security negates the impact of market interest rates. Because the base rate used to calculate that month’s dividend rate resets each month, it is largely immune to changes in overall interest rates. The dividend rate paid will either increase or decrease each month based upon the then-current on-market rate.
•
Credit Spread: The initial valuation of TFP-VRM is largely based upon an on-market credit spread. Since the inception of TFP-VRM, the credit spread has been stable and remained within a 0.05% to 0.15% range. A differential of 15 basis points for an entire year would only change the valuation by ~0.1% (i.e., 99.9% or 100.1%). An on-market credit spread would only materially change in the event of material risk of non-payment of liquidation preference (i.e., “default”). Additionally, TFP-VRM have kept a category rating of AA from
Mr. John Kernan, Esq.
April 1,
Page
Nationally Recognized Statistical Ratings Organization and maintain overall asset coverage requirements making risk nearly non-existent.
•
Tenor: TFP-VRM do not have a long “tenor/maturity/holding period,” which increases the potential for having greater valuation dispersion. TFP-VRM are very short-dated, meaning that the potential for long periods of time where the current fixed spread does not approximate on-market value is remote. Additionally, under an Evergreen tenor either party has ability to take steps to re-align fixed spreads to on-market value.
For the reasons described above, the Adviser has determined:
(a) The variance of TFP-VRM’s valuation as of January 31, 2023, and July 31, 2023, was minimal, and, therefore, approximated its liquidation preference of $100,000,000 and $285,000,000, respectively. Because TFP-VRM is a variable rate security, its credit spread reflects minimal overall volatility and the overall holding tenor (if there were a change to “on-market rate”) is short. As such, heightened interest rate and spread volatility did not impact the Adviser’s determination that the fair value of TFP-VRM approximated the liquidation preference during the fiscal periods ended January 31, 2023, and July 31, 2023.
(b) ASC 820-10-50-2E applies to assets and liabilities not measured at fair value in the Statement of Assets and Liabilities but for which fair value is disclosed. Here, the fair value of a TFP-VRM is equivalent to the liquidation preference of a TFP-VRM, and the liquidation preference of TFP-VRM is disclosed in the Fund’s Statement of Assets and Liabilities. Therefore, TFP-VRM are not subject to the requirements of ASC 820-10-50-2E. However, the Registrant will continue to include the following disclosure immediately below the fair value leveling tables in the “3. Investment Valuation and Fair Value Measurements” section of the Notes to Financial Statements:
The Funds hold liabilities in preferred shares, where applicable, which are not reflected in the tables above. The fair values of the Funds’ liabilities for preferred shares approximate their liquidation preference. Preferred shares are generally classified as Level 2 and further described in these Notes to Financial Statements.
Additionally, on a prospective basis, the disclosure in “6. Fund Shares” within the Notes to Financial Statements for the Funds that hold TFP-VRM, specifically the disclosure describing how TFP Shares may be redeemed, will include a reference to the 60-day Evergreen tenor. In addition, the description of the fair value of TFP-VRM set forth under “6. Fund Shares” will be replaced with the following:
Mr. John Kernan, Esq.
April 1,
Page
The fair value of TFP Shares while in VRM are expected to approximate their liquidation preference so long as the fixed “spread” on the shares remains roughly in line with the “spread” being demanded by investors on instruments having similar terms in the current market. During the current reporting period, the Adviser determined that the fair value of the shares approximated their liquidation preference.
* * * * *
If you have any additional questions or comments, please do not hesitate to contact me at (202) 373-6725.
Sincerely,
/s/ Thomas S. Harman
Show Raw Text
CORRESP 1 filename1.htm CORRESP Thomas S. Harman Partner +1.202.373.6725 thomas.harman@morganlewis.com April 1, 2024 VIA EDGAR Mr. John Kernan, Esq. Division of Investment Management, Disclosure Review & Accounting Office U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: Nuveen Closed-End Funds – Sarbanes Oxley Review Dear Mr. Kernan: This letter addresses the comments you provided in a telephone discussion on February 14, 2024, regarding reviews performed by the staff of the U.S. Securities and Exchange Commission (the “SEC Staff”) of certain regulatory filings made by our clients, the Nuveen closed-end registered investment companies listed on Appendix A, attached hereto (each, a “Fund” or “Registrant” and, collectively, the “Funds” or “Registrants”), each of which is advised by Nuveen Fund Advisors, LLC (the “Adviser”). Each comment is shown below followed by management’s response. 1. Comment: In response to Item B.20 of Form N-CEN, filed for the period ended July 31, 2023, the Nuveen Floating Rate Income Fund (”JFR”) reported a material change in method of valuation impacting CMBS, CMOs and CLOs. In correspondence, please explain the nature of the changes, the reasons for making them and the omission of disclosure of the same pursuant to ASC 820-10-50-2. Response: As part of an initiative to implement a single valuation policy for both the Nuveen and TIAA-CREF Fund complexes (collectively, the “Complexes”), the Adviser reviewed the pricing conventions used by asset class given that different valuation techniques had been used historically for certain asset classes within the Complexes. Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC 20004 United States +1.202.739.3000 +1.202.739.3001 Mr. John Kernan, Esq. April 1, 2024 Page 2 The Adviser determined that mid pricing was more consistent with historical transaction prices, reflected a more precise measure of estimate and was more representative of fair value for CMBS, CMOs and CLOs. Accordingly, effective September 1, 2022, the Adviser determined to change from a bid to mid pricing convention for CMBS, CMOs and CLOs. This change was applied prospectively consistent with accounting guidance under ASC 820-10-35-25 and ASC 820-10-35-26. In preparing the Funds’ financial statements, including those of JFR, the Adviser considered the requirements of ASC 250-10-50-5, and determined that disclosure for the change in valuation technique from a bid to mid pricing convention for CMBS, CMOs and CLOs was not required. The Adviser also considered the requirements of ASC 820-10-50-2 and determined that the change in valuation technique, and the reasons for making the change, were not material to the Funds’ financial statements and therefore did not require disclosure for the following reasons: • As of the periods ended July 31, 2022, and September 1, 2022, a change from bid to mid pricing convention for CMBS, CMOs and CLOs was deemed immaterial to the NAV of JFR, as well as the NAVs of the other Funds, and therefore the Adviser concluded that the change in valuation technique was not required per ASC 820-10-50-2. • The valuation disclosure within the Notes to Financial Statements does not describe in detail the valuation techniques used for individual securities or sub-asset types as there is expected to be some variability depending on the facts and circumstances relevant for individual securities, but rather discloses the overall valuation methodology and factors considered in how fair value estimates are determined. • The inputs and assumptions of such valuation techniques used in determining both the bid and mid prices for securities are substantially the same and the use of both bid and mid pricing conventions is reasonable for determining the fair value of these securities held in JFR, as well as the other Funds, which have been applied consistently. • The use of bid or mid pricing conventions is but one factor considered by the Adviser when determining the fair value of securities. Other considerations include but are not limited to: the pricing services used by the Fund, price exception reviews including price tolerance reports comparing the current day’s price with the prior day’s price, acid test reports comparing executed trade levels with the pricing vendor’s price, price comparison reports comparing the primary pricing vendor’s price with that of secondary or alternative pricing vendors, and unchanged price reports, for example. Mr. John Kernan, Esq. April 1, 2024 Page 3 For the reasons set forth above, the Adviser’s response to Item B.20 of Form N-CEN should have been “No” with respect to JFR, as well as the other Funds. 2. Comment: The SEC Staff notes that disclosure included in the Notes to Financial Statements titled “6. Fund Shares” states that the fair value of JFR’s Taxable Fund Preferred Shares (“TFPs”) while in Variable Rate Mode (“VRM”) are expected to approximate their liquidation preference. Please describe the impact of heightened interest rate and spread volatility on the fair value of TFPs during the fiscal year ended July 31, 2023. In your response, please (a) describe the valuation procedures undertaken to assess the fair value of the TFPs and provide the results in dollars of the Adviser’s determination of the fair value of the TFPs as of January 31, 2023, and July 31, 2023, and (b) explain the omission of disclosure required by ASC 820-10-50-2E, which is applicable to assets and liabilities not measured at fair value in the Statement of Assets and Liabilities but for which fair value is disclosed, and includes disclosure of leveling valuation techniques and inputs. Response: TFPs while in VRM (“TFP-VRM”) are variable rate securities that pay a monthly dividend which is determined by a fixed spread (e.g., 1.00%) plus a short-term index (i.e., Secured Overnight Financing Rate (SOFR)). The “holding or commitment period” of a TFP-VRM is typically very short. The holding period is initially two years and eventually converts to a 60-day Evergreen tenor, meaning so long as either party does not initiate a tenor maturity date, the period will reset to a constant 60 days each day. The Adviser determined that fair value of a TFP-VRM is equivalent to the liquidation preference of a TFP-VRM for the following reasons: • Variable rate: The variable rate on the security negates the impact of market interest rates. Because the base rate used to calculate that month’s dividend rate resets each month, it is largely immune to changes in overall interest rates. The dividend rate paid will either increase or decrease each month based upon the then-current on-market rate. • Credit Spread: The initial valuation of TFP-VRM is largely based upon an on-market credit spread. Since the inception of TFP-VRM, the credit spread has been stable and remained within a 0.05% to 0.15% range. A differential of 15 basis points for an entire year would only change the valuation by ~0.1% (i.e., 99.9% or 100.1%). An on-market credit spread would only materially change in the event of material risk of non-payment of liquidation preference (i.e., “default”). Additionally, TFP-VRM have kept a category rating of AA from Mr. John Kernan, Esq. April 1, 2024 Page 4 Nationally Recognized Statistical Ratings Organization and maintain overall asset coverage requirements making risk nearly non-existent. • Tenor: TFP-VRM do not have a long “tenor/maturity/holding period,” which increases the potential for having greater valuation dispersion. TFP-VRM are very short-dated, meaning that the potential for long periods of time where the current fixed spread does not approximate on-market value is remote. Additionally, under an Evergreen tenor either party has ability to take steps to re-align fixed spreads to on-market value. For the reasons described above, the Adviser has determined: (a) The variance of TFP-VRM’s valuation as of January 31, 2023, and July 31, 2023, was minimal, and, therefore, approximated its liquidation preference of $100,000,000 and $285,000,000, respectively. Because TFP-VRM is a variable rate security, its credit spread reflects minimal overall volatility and the overall holding tenor (if there were a change to “on-market rate”) is short. As such, heightened interest rate and spread volatility did not impact the Adviser’s determination that the fair value of TFP-VRM approximated the liquidation preference during the fiscal periods ended January 31, 2023, and July 31, 2023. (b) ASC 820-10-50-2E applies to assets and liabilities not measured at fair value in the Statement of Assets and Liabilities but for which fair value is disclosed. Here, the fair value of a TFP-VRM is equivalent to the liquidation preference of a TFP-VRM, and the liquidation preference of TFP-VRM is disclosed in the Fund’s Statement of Assets and Liabilities. Therefore, TFP-VRM are not subject to the requirements of ASC 820-10-50-2E. However, the Registrant will continue to include the following disclosure immediately below the fair value leveling tables in the “3. Investment Valuation and Fair Value Measurements” section of the Notes to Financial Statements: The Funds hold liabilities in preferred shares, where applicable, which are not reflected in the tables above. The fair values of the Funds’ liabilities for preferred shares approximate their liquidation preference. Preferred shares are generally classified as Level 2 and further described in these Notes to Financial Statements. Additionally, on a prospective basis, the disclosure in “6. Fund Shares” within the Notes to Financial Statements for the Funds that hold TFP-VRM, specifically the disclosure describing how TFP Shares may be redeemed, will include a reference to the 60-day Evergreen tenor. In addition, the description of the fair value of TFP-VRM set forth under “6. Fund Shares” will be replaced with the following: Mr. John Kernan, Esq. April 1, 2024 Page 5 The fair value of TFP Shares while in VRM are expected to approximate their liquidation preference so long as the fixed “spread” on the shares remains roughly in line with the “spread” being demanded by investors on instruments having similar terms in the current market. During the current reporting period, the Adviser determined that the fair value of the shares approximated their liquidation preference. * * * * * If you have any additional questions or comments, please do not hesitate to contact me at (202) 373-6725. Sincerely, /s/ Thomas S. Harman Thomas S. Harman cc: K. Michael Carlton, Esq. E. Scott Wickerham, Vice President and Funds’ Controller (Principal Financial Officer) John McCann, Vice President and Assistant Secretary of the Funds; Managing Director and Associate General Counsel Brett E. Black, Chief Compliance Officer and Managing Director of the Funds Eric Fess, Chapman & Cutler, LLP, Counsel to the Independent members of the Board of Directors/Trustees of the Funds Robert Zutz, K&L Gates LLP, Counsel to the Independent members of the Board of Directors/Trustees of the Funds Mr. John Kernan, Esq. April 1, 2024 Page 6 Appendix A CIK File # Registrant Name FYE Reviewed 1 0001137887 811-10345 Nuveen Municipal Credit Income Fund 10/31/2023 2 0001083839 811-09297 Nuveen Quality Municipal Income Fund 10/31/2023 3 0001450445 811-22253 Nuveen AMT-Free Municipal Value Fund 10/31/2023 4 0001195737 811-21213 Nuveen AMT-Free Quality Municipal Income Fund 10/31/2023 5 0000830271 811-05488 Nuveen Municipal Income Fund, Inc. 10/31/2023 6 0001793129 811-23489 Nuveen Dynamic Municipal Opportunities Fund 10/31/2023 7 0001266585 811-21449 Nuveen Municipal High Income Opportunity Fund 10/31/2023 8 0001774342 811-23440 Nuveen Municipal Credit Opportunities Fund 10/31/2023 9 0001090116 811-09475 Nuveen AMT-Free Municipal Credit Income Fund 10/31/2023 10 0000812801 811-05120 Nuveen Municipal Value Fund, Inc. 10/31/2023 11 0001861115 811-23669 Nuveen Multi-Asset Income Fund 12/31/2022 12 0001777482 811-23445 Nuveen Enhanced High Yield Municipal Bond Fund 3/31/2023 13 0000897419 811-07484 Nuveen Massachusetts Quality Municipal Income Fund 5/31/2023 14 0000899782 811-07616 Nuveen Missouri Quality Municipal Income Fund 5/31/2023 15 0001607997 811-22967 Nuveen Minnesota Quality Municipal Income Fund 5/31/2023 16 0000897421 811-07490 Nuveen Virginia Quality Municipal Income Fund 5/31/2023 17 0000838131 811-05642 Nuveen Multi-Market Income Fund 6/30/2023 18 0001276533 811-21494 Nuveen Floating Rate Income Fund 7/31/2023 19 0001547994 811-22699 Nuveen Preferred and Income Term Fund 7/31/2023 20 0001176433 811-21137 Nuveen Preferred & Income Securities Fund 7/31/2023 21 0001679033 811-23198 Nuveen Preferred and Income Fund 7/31/2023 22 0001865389 811-23704 Nuveen Variable Rate Preferred & Income Fund 7/31/2023 23 0001227476 811-21333 Nuveen Credit Strategies Income Fund 7/31/2023 24 0001216583 811-21293 Nuveen Preferred & Income Opportunities Fund 7/31/2023