Western Asset Investment Grade Defined Opportunity Trust Inc. Announces Results of Special Meeting of Stockholders and Other Fund Developments
Western Asset Investment Grade Defined Opportunity Trust, trading under 'IGI,' announced stockholders approved converting the Fund to a perpetual fund at a special meeting on June 7, 2024.
This entails eliminating its planned liquidation on December 2, 2024. A tender offer will start in September 2024 for up to 100% of the Fund’s Common Stock at net asset value.
If at least $50 million remains post-tender, the Fund will be renamed 'Western Asset Investment Grade Opportunity Trust,' retaining the ticker 'IGI.'
If less than $50 million remains, the Fund will liquidate in December 2024. A fee waiver of 10 basis points on the annual management fee will be applied until June 7, 2026.
The Fund is managed by Franklin Templeton Fund Adviser and sub-advised by various Western Asset Management entities.
- Stockholders approved converting the Fund to a perpetual fund, providing long-term investment opportunities.
- Tender offer for up to 100% of Common Stock at net asset value starts in September 2024.
- Fund name will change but the ticker symbol 'IGI' remains unchanged.
- Management fee reduction by 10 basis points for two years, benefiting investors.
- Fund managed by a reputable financial entity, Franklin Templeton Fund Adviser, and sub-advised by Western Asset Management.
- If less than $50 million in net assets remain after the tender offer, the Fund will liquidate, impacting long-term investors.
- Shares of closed-end funds often trade at a discount to their net asset value, increasing risk of loss for investors.
- Fund shares may fluctuate with market conditions, potentially being worth less than the original investment at the time of sale.
- The press release indicates a general investment risk and the potential for loss.
Insights
The decision to convert the Fund to a perpetual fund rather than liquidating it could have several financial implications for investors. A perpetual fund has no set termination date, allowing the fund to continue operating indefinitely. This change can be attractive for long-term investors who prefer continuous potential for returns, but it also means investors won't receive a predictable liquidity event on December 2, 2024.
The announcement of a tender offer for up to 100% of the Fund's common stock at net asset value (NAV) is significant. Tender offers typically provide a temporary uptick in the share price as investors anticipate the ability to sell their shares at NAV, which can be higher than the market price. However, the condition requiring at least
The management fee waiver of 10 basis points for two years is a modest incentive for existing and potential investors. It slightly reduces the cost of investing in the Fund, which can be beneficial in a low-yield environment.
Ultimately, these changes introduce a mix of stability and uncertainty. Long-term investors may appreciate the perpetual nature and fee waiver, while the tender offer and potential liquidation could cause short-term share price fluctuations.
The transformation of the Fund from a term-limited to a perpetual fund aligns with broader market trends where funds seek to provide continuous investment opportunities. This shift can be interpreted as a move to retain capital within the management firm and avoid the liquidation process, which might lead to asset sales under less favorable conditions.
The tender offer is a strategic move to address the Fund’s trading discount to NAV, a common issue with closed-end funds. While potentially beneficial to shareholders seeking liquidity at NAV, it also serves to test the market’s confidence in the Fund's strategy and management. The $50 million minimum asset threshold is a safeguard to ensure the Fund remains viable post-tender, but it reflects a substantial risk if not met, leading to liquidation.
Investors should monitor market reaction closely, especially the tender offer's reception and subsequent asset levels. The management fee waiver, while minor, underscores the management's commitment to aligning with shareholder interests and reducing costs. Overall, the developments aim to balance long-term stability with immediate liquidity options, essential for investor confidence in a volatile market.
Stockholders approved the proposal to convert the Fund to a perpetual fund by eliminating the Fund’s term, which was scheduled to end at the close of business on December 2, 2024 and eliminating the Fund’s fundamental policy to liquidate on or about December 2, 2024.
As a result of the proposal’s approval, the following will occur:
-
The Fund will conduct a tender offer beginning in September 2024 for up to
100% of the Fund’s Common Stock at a price per share equal to net asset value (“Tender Offer”); -
If the Fund maintains at least
$50 million $50 million - The Fund’s investment manager has agreed to waive 10 basis points of its annual management fee (the “Fee Waiver”) for a period of two years following the proposal’s approval. The Fee Waiver will terminate on June 7, 2026.
Western Asset Investment Grade Defined Opportunity Trust Inc. is a non-diversified, limited-term, closed-end management investment company managed by Franklin Templeton Fund Adviser, LLC (formerly known as Legg Mason Partners Fund Advisor, LLC) and is sub-advised by Western Asset Management Company, LLC (“Western Asset”), Western Asset Management Company Pte. Ltd. (“Western Asset Singapore”), Western Asset Management Company Ltd (“Western Asset Japan”) and Western Asset Management Company Limited (“Western Asset London”) are the Fund’s subadvisers. FTFA, Western Asset, Western Asset Singapore, Western Asset Japan and Western Asset London are indirect, wholly-owned subsidiaries of Franklin Resources, Inc.
For more information, please call Investor Relations on 1-888-777-0102, or consult the funds’ web sites www.franklintempleton.com/investments/options/closed-end-funds. Hard copies of each fund’s complete audited financial statements are available free of charge upon request.
The Fund’s shares are traded on the New York Stock Exchange. Similar to stocks, Fund share prices will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value, and can increase an investor’s risk of loss. All investments are subject to risk, including the risk of loss.
THIS PRESS RELEASE IS NOT AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES OF THE FUNDS. THIS PRESS RELEASE MAY CONTAIN STATEMENTS REGARDING PLANS AND EXPECTATIONS FOR THE FUTURE THAT CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT ARE FORWARD-LOOKING AND CAN BE IDENTIFIED BY THE USE OF WORDS SUCH AS “MAY,” “WILL,” “EXPECT,” “ANTICIPATE,” “ESTIMATE,” “BELIEVE,” “CONTINUE” OR OTHER SIMILAR WORDS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON EACH FUND’S CURRENT PLANS AND EXPECTATIONS, AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS.
ADDITIONAL INFORMATION CONCERNING SUCH RISKS AND UNCERTAINTIES IS CONTAINED IN EACH FUND’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
About Western Asset
Western Asset is one of the world’s leading fixed-income managers with 50 years of experience and
Western Asset is an independent specialist investment manager of Franklin Templeton.
About Franklin Templeton
Franklin Resources, Inc. is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,500 investment professionals, and offices in major financial markets around the world, the
Category: Fund Announcement
Source: Franklin Resources, Inc.
Source: Legg Mason Closed End Funds
View source version on businesswire.com: https://www.businesswire.com/news/home/20240611609682/en/
Investor Contact: Fund Investor Services-1-888-777-0102
Media Contact: Lisa Tibbitts
+1 (904) 942-4451
Lisa.Tibbitts@franklintempleton.com
Source: Franklin Resources, Inc. and Legg Mason Closed End Funds
FAQ
What was approved at the IGI Special Meeting of Stockholders on June 7, 2024?
When will the IGI tender offer start?
What will happen if IGI retains less than $50 million in net assets following the tender offer?
Will the IGI ticker symbol change after the Fund’s conversion?
How long will the IGI management fee waiver last?
