KBRA Assigns and Affirms Ratings for Mandatory Redeemable Preferred Shares Issued by Calamos Strategic Total Return Fund
KBRA assigns a ‘AA-’ rating to $151.0 million Series H Mandatory Redeemable Preferred Shares ("MRPS") issued by Calamos Strategic Total Return Fund (the “Fund” or "CSQ"). Concurrently, KBRA affirms the ratings assigned to the outstanding Series C, F, and G MRPS issued by the Fund. The Outlook on all ratings is Stable.
The rating action reflects the stable composition of the Fund’s portfolio, which is primarily invested in U.S-domiciled common stocks and convertible securities, with notable exposures to Information Technology, Financials, and Industrials sectors. Whilst total leverage asset coverage levels have varied in recent years due to market volatility, CSQ has maintained asset coverage ratios well in excess of the Investment Company Act of 1940 (the “'40 Act”) requirements. The Fund’s history of maintaining asset coverage levels that consistently exceed the ’40 Act regulatory thresholds, and the relative stable performance of the portfolio supports the affirmation of the rating.
Key Credit Considerations
Asset Coverage: The Fund is registered under the '40 Act which imposes minimum asset coverage requirements on leverage. The Fund must maintain at least 200% coverage on total leverage (including senior debt and MRPS) and 300% on senior debt in order to issue additional debt or preferred shares. Further, under the terms of the MRPS agreements, distributions to common shareholders are prohibited unless total asset coverage exceeds 225%, which incentives the Fund to maintain its asset coverage cushion. As of June 30, 2026, the total asset coverage was 342.3% compared to 332.3% as of July 31, 2025. Following the proposed issuance, the Fund is expected to increase total leverage and rebalance its leverage mix, resulting in pro forma total asset coverage of 322.6%.
