ALLIANCEBERNSTEIN NATIONAL MUNICIPAL INCOME FUND, INC. ANNOUNCES PLAN FOR FULL REDEMPTION OF 2019 VARIABLE RATE MUNIFUND TERM PREFERRED SHARES AND ISSUANCE OF NEW VARIABLE RATE DEMAND PREFERRED SHARES AS SUBSTITUTE LEVERAGE
On May 13, 2024, AllianceBernstein National Municipal Income Fund (NYSE: AFB) announced a plan to redeem its 2019 Variable Rate MuniFund Term Preferred Shares (2019 VMTPS) and issue new Variable Rate Demand Preferred Shares (2024 VRDPS). The private offering aims to raise up to $100 million, targeted at qualified institutional buyers. The proceeds will be used along with funds from tender option bond trusts to cover the redemption of the 2019 VMTPS at $25,000 per share plus unpaid dividends, totaling $143.85 million. The redemption and issuance are conditional on successful placement and intended to occur around June 6, 2024. The initiative aims to replace existing leverage and is considered by the Fund's management to be in the best interest of shareholders.
- The Fund plans to raise up to $100 million through a private offering of 2024 VRDPS.
- The proceeds will be used to redeem the 2019 VMTPS, potentially improving leverage management.
- The Fund believes the action is in the best interest of stockholders, aiming to enhance financial stability.
- The redemption of the 2019 VMTPS is contingent upon the successful placement of the 2024 VRDPS.
- Total redemption cost of $143.85 million plus unpaid dividends could impact liquidity if the issuance does not go as planned.
Insights
The announcement highlights a significant restructuring of the Fund's leverage strategy, with an issuance of up to
From a financial perspective, this maneuver could be advantageous by aligning the Fund's leverage with current market conditions. The new preferred shares might carry more favorable terms, reflecting today's interest rate environment. It's noteworthy that the redemption price of
Potential benefits include improved liquidity, potentially lower cost of capital and enhanced financial flexibility. However, the successful placement of the new preferred shares is crucial. Failure to place these shares could create a short-term liquidity risk, affecting the Fund's operations.
Retail investors should monitor the terms of the new shares and the interest rate environment closely. The issuance to qualified institutional buyers under Rule 144A highlights the target audience's sophistication, but retail investors should understand the broader impact on the Fund's financial health.
This restructuring is significant in the context of the broader market for municipal income funds. By substituting the older 2019 VMTPS with the 2024 VRDPS, AllianceBernstein National Municipal Income Fund positions itself more competitively. Variable Rate Demand Preferred Shares are typically more attractive during periods of fluctuating interest rates because they offer more flexibility in adjusting rates compared to fixed-term preferred shares.
The decision to offer the 2024 VRDPS exclusively to qualified institutional buyers under Rule 144A suggests a targeted approach towards more sophisticated investors, likely aiming to secure a stable and potentially lower cost of capital. Additionally, this move might reflect strategic positioning in anticipation of future interest rate movements.
For retail investors, understanding the implications of leverage in closed-end funds is crucial. The use of leverage can amplify returns but also increases risk, especially if there are unexpected shifts in interest rates. This specific transaction might signal management's confidence in their forward-looking interest rate expectations and their ability to manage leverage efficiently.
The legal framework surrounding this transaction is important for investors to understand. The redemption and issuance process involves compliance with several regulatory requirements, including rules under the Securities Act of 1933. The mention of Rule 144A indicates that the new shares are restricted securities, which means they can only be sold to qualified institutional buyers.
This exclusion of retail investors from the initial offering is important to note. It reflects the complexity and sophistication of the financial instruments involved. Additionally, the redemption of the 2019 VMTPS is contingent upon successful placement of the new preferred shares. This condition is a standard legal safeguard to ensure that the Fund maintains necessary liquidity and compliance with its financial obligations.
Investors should also consider the implications of accumulated but unpaid dividends on the 2019 VMTPS. This factor could affect the timing and financial impact of the redemption process. Understanding these legal nuances can help investors better gauge the risk profile and operational stability of the Fund moving forward.
Proceeds from the offering are expected to be used, in conjunction with proceeds from the creation of tender option bond ("TOB") trusts by the Fund, to redeem all of the Fund's currently outstanding 2019 Variable Rate MuniFund Term Preferred Shares ("2019 VMTPS") at a redemption price of
The redemption of the 2019 VMTPS are subject to certain notice and other requirements and conditioned upon the successful issuance and placement of new preferred shares of the Fund. The Fund intends to redeem the 2019 VMTPS on or about June 6, 2024.
The 2024 VRDPS, if successfully placed, will allow the Fund to replace a substantial portion of the leverage currently obtained through the 2019 VMTPS with the new preferred shares. AllianceBernstein L.P., the Fund's investment adviser, and the Board of Directors of the Fund believe the full redemption of the 2019 VMTPS and proposed issuance of 2024 VRDPS is in the best interests of the Fund and its stockholders.
This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities.
View original content:SOURCE AllianceBernstein National Municipal Income Fund, Inc.
FAQ
What is the purpose of AllianceBernstein National Municipal Income Fund's (AFB) new VRDPS offering?
When will AllianceBernstein National Municipal Income Fund (AFB) redeem the 2019 VMTPS?
Who are the targeted buyers for the new 2024 VRDPS issued by AllianceBernstein National Municipal Income Fund (AFB)?
How much will AllianceBernstein National Municipal Income Fund (AFB) pay for the redemption of the 2019 VMTPS?
What conditions must be met for AllianceBernstein National Municipal Income Fund (AFB) to proceed with the redemption of the 2019 VMTPS?
