BNY Mellon municipal bond infrastructure fund preferred shares rating affirmed at AA

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BNY Mellon preferred shares AA rating

Highlights

Fitch Ratings affirmed the AA rating on BNY Mellon's series W-7 RVMTP shares, citing asset coverage, mandatory deleveraging, and strong legal/investment adviser framework.
As of July 31, 2026, effective leverage for the fund stands at 36%, well below the 45% maximum, with asset coverage ratio exceeding the 225% minimum.
Monthly compliance with overcollateralization thresholds triggers immediate redemption of preferred shares upon breach, while RVMTP shares have mandatory tender features and periodic rating reassessment upon special term changes.

Rating rationale and fund structure

As reported by Fitch Ratings, the affirmation applies to the fund's series W-7 RVMTP shares and is supported by asset coverage levels, mandatory deleveraging provisions, the legal framework governing the fund, and the capabilities of BNY Mellon Investment Adviser, Inc. and Insight North America LLC as investment advisers.

DMB is a diversified closed-end management company that seeks a high level of current income exempt from regular federal income tax while preserving capital. The fund invests at least 80% of its assets in municipal bonds tied to U.S. infrastructure sectors and projects, including transportation, power, water, wastewater, oil and gas pipelines, schools, health care facilities, public facilities, and convention centers.

Fitch says tender option bond transactions create some subordination risk for preferred shareholders, but it views that risk as manageable because creditor claims are fully collateralized and senior to preferred shares. The agency also considers refinancing risk minimal because the fund's liquidity arrangements and transaction documents provide for timely redemption as maturities approach.

Leverage metrics and investor protections

As of July 31, 2026, Fitch-calculated effective leverage stands at 36%, while the fund's 1940 Act asset coverage ratio exceeds the 225% minimum required under governing documents. Fitch says the effective leverage ratio also remains below the 45% maximum, supporting the assigned rating level.

The RVMTP shares are subject to mandatory tender on each 42-month anniversary of the effective date or at the end of a special terms period, unless holders choose to retain them. Shares that are not retained or successfully remarketed by the early term redemption date are redeemed by the fund.

Fitch says compliance with its overcollateralization thresholds is tested monthly under the basic maintenance amount, and any breach that is not cured by the deadline requires the fund to redeem enough preferred shares to restore total and net OC ratios to 100%. The agency adds that if special terms become effective after the 24-month anniversary, it will re-evaluate the structure for any effect on the rating; such terms require approval from DMB's board and all RVMTP holders.

Our earlier article covered Fitch’s 'AA+' rating on Timpanogos Sanitary Sewer District’s $190.4 million sewer revenue bond sale, tied to financing a major wastewater treatment plant upgrade and expansion. It highlighted Fitch’s view that leverage would rise materially over the next five years as capital spending increases, narrowing rating headroom, while also noting temporary metric distortions from the district’s shift in fiscal year-end that should normalize by fiscal 2028.

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