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Category: CEF

CEF Highland Opportunity and Income Fund Tenders for Common Using Preferred Shares

Closed end fund Highland Opportunity and Income Fund (HFRO) has announced they are tendering for up to $100 million in common shares using a new Series B preferred issue. Details of the new preferred issue have not been announced, but they state they will be structured similarly to the Series A (HFRO-A) which is currently outstanding.

The intent of the tender offer is to try to move the common share price higher–it trades at a very steep discount to net asset value.

HFRO-A has almost always traded weakly–while A1 rated by Moodys there appears to be little confidence in the management of Highland Opportunity and Income Fund. A large share of their investments are in funds run by Nexpoint–which also is the advisor to HFRO. This company seems to have way too many incestuous relationships to be taken real seriously.

The press release from the company can be read here.

Thanks to J for posting info in comments earlier today.

CEFs Virtus Convertible and Income and Virtus Convertible and Income II Back in ‘Compliance’.

Both the Virtus Convertible and Income Fund (NCV) and the Virtus Convertible and Income Fund II (NCZ) have come back into compliance with required asset coverage rations.

The 2 CEfs had to suspend their common share distributions, which is the kiss of death to a CEF because of a breaking of the asset coverage test (they must have at least 200% coverage of their ‘senior securities’). They have now scheduled the distributions.

Both funds determined they would tender for the auction rate preferred shares ($25,000/share) and were successful in having 99.7% and 99.2% of the shares tendered in an voluntary tender offer.

One would have to calculate the coverage ratio, which I have not done, but obviously now over 200%.

It is a fair assumption that the 2 funds liquidated assets to be able to fund the repurchase of the auction rate preferred shares.

Both CEFs have an issue of exchange traded preferreds outstanding. Both issues have been trading down on the fund issues and now have current yields at 6.50%.

Virtus Convertible and Income (NCV) has a 5.625% preferred which can be seen here.

Virtus Convertible and Income II (NCZ) has a 5.50% preferred which can be seen here.

The company press release is here.