Rating Action: Moody’s affirms preferred-share ratings of five PIMCO multi-sector closed end fundsGlobal Credit Research – 01 Apr 2021New York, April 01, 2021 — Moody’s Investors Service, (“Moody’s”) has affirmed the ratings of Auction Rate Preferred Shares (ARPS) issued by five PIMCO closed end funds.A summary of the rating actions taken follows:–PIMCO Corporate & Income Opportunity Fund (NYSE: PTY), Series M, T, W, TH, and F Auction Rate Preferred Securities shares, $212.7 million (8,506 shares with a liquidation preference of $25,000 per share) affirmed at A2 (sf)–PIMCO Corporate & Income Strategy Fund (NYSE: PCN), Series M, T, W, TH, and F Auction Rate Preferred Securities shares, $23.5 million (941 shares with a liquidation preference of $25,000 per share) affirmed at Aa3 (sf)–PIMCO High Income Fund (NYSE: PHK), Series M, T, W, TH, and F Auction Rate Preferred Securities shares, $58.1 million (2,322 shares with a liquidation preference of $25,000 per share) affirmed at A2 (sf)–PIMCO Income Strategy Fund (NYSE: PFL), Series T, W, and TH Auction Rate Preferred Securities shares, $45.2 million (1,808 shares with a liquidation preference of $25,000 per share) affirmed at Aa3 (sf)–PIMCO Income Strategy Fund II (NYSE: PFN), Series M, T, W, TH, and F Auction Rate Preferred Securities shares, $87.4 million (3,497 shares with a liquidation preference of $25,000 per share) affirmed at Aa3 (sf)RATINGS RATIONALEThe ARPS ratings of the five funds are supported by their diverse portfolio holdings, which include a range of assets classes such as corporate bonds and notes, asset-backed securities, loan participations and assignments, and non-agency mortgage-backed securities.The difference in the funds’ ARPS ratings reflect differences in their investment styles and balance sheet management. The Aa3 (sf) ratings of PCN, PFL, and PFN are consistent with these funds’ objectives of seeking high current income while preserving capital. Estimated leverage is under 35%, and exposures are somewhat more constrained with respect to investing in non-corporate credits or higher risk sectors.PTY’s and PHK’s A2 (sf) ratings are consistent with the funds’ investment objectives targeting total return, from income and capital appreciation. PTY, the largest of the funds, with estimated leverage exceeding 40%, is the most leveraged and is the least constrained of the funds with respect to investment in non-corporate credits, including greater exposure to asset backed securities. PHK has had greater exposures to municipal bonds and notes and preferred securities.Generally, we expect the lower rated funds to take more aggressive postures toward opportunistically holding weaker credits, and we express this concern with a slightly weaker evaluation of their credit profiles. While the funds have been compensated historically for the risks they take, we nonetheless feel these exposures increase risk to holders of their ARPS.The funds’ flexible approach to leverage, which prominently features use of reverse repurchase agreements, as well as credit default swaps, has generally enabled management to position the funds opportunistically or to manage risk when required. However, variability of leverage weighs on the funds’ credit profiles, as we consider the risk of leverage across the range of market environments. Credit default swaps are used largely to assume exposure to credits that might otherwise be less accessible in cash markets.Currently, ARPS represent a small fraction of each of the funds’ leverage, partially as a result of their tender offers for ARPS in 2019, which reduced the number of ARPS outstanding. As such, under our approach to priority of claim notching, each of the ARPS ratings are lowered two notches vis a vis the funds’ senior rating profiles.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ARPS ratings could be upgraded if there is 1) a sustained improvement in any fund’s risk-adjusted asset coverage ratio; 2) a strengthening in the credit quality or liquidity of any fund’s investment portfolio; or 3) an increase in any fund’s coverage of fixed charges.The ARPS ratings could be downgraded if there is 1) a sustained decline in any fund’s risk-adjusted asset coverage ratio; 2) a deterioration in the credit quality or liquidity of the fund’s investment portfolio; or 3) a compression of any fund’s coverage of fixed charges.PIMCO, located in Newport Beach, CA, serves as the investment manager of the funds. Organized in 1971, PIMCO is a majority-owned indirect subsidiary of Allianz SE. As of September 30, 2020, PIMCO had approximately $2.03 trillion of assets under management.The principal methodology used in these ratings was “Closed-End Funds Methodology” published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1205925. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Moody’s did not use any models, or loss or cash flow analysis, in its analysis.Moody’s did not use any stress scenario simulations in its analysis.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Neal M. Epstein, CFA VP – Senior Credit Officer Financial Institutions Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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