NXG NextGen Infrastructure Income Fund (NYSE: NXG) Announces Terms of Rights Offering and Change to Record Date of July Distribution
The board of trustees of NXG NextGen Infrastructure Income Fund (NYSE: NXG) has approved the terms of a rights offering, allowing common shareholders as of June 20, 2024, to subscribe to new common shares. Shareholders will receive one right per share held, with the ability to purchase one new share for every three rights. The subscription period will end on July 17, 2024, and the subscription price will be based on a formula of 92.5% of the average sales price or 86% of net asset value, whichever is lower. The rights are transferable and will trade on the NYSE under 'NXG RT'. The offering aims to increase the fund's investment assets, taking advantage of new opportunities. Additionally, the July distribution record date has been moved to July 8, 2024, with a payout of $0.54 per share scheduled for July 31, 2024.
- Rights offering allows purchase of shares at a discount to market price.
- Potential to increase fund's investment assets and capitalize on new opportunities.
- Rights are transferable and tradeable on NYSE under 'NXG RT'.
- Shareholders have an over-subscription privilege for additional shares.
- Subscription price may be below net asset value, potentially diluting existing shares.
- Expenses related to the offering will be borne by the fund's common shareholders.
- Record date change for July distribution may affect shareholder planning.
- 100% of the July distribution is estimated to be a return of capital, not earnings.
Insights
The rights offering announced by NXG NextGen Infrastructure Income Fund aims to raise additional capital by allowing current shareholders to purchase more shares at a discount. This strategy can provide immediate capital inflow which can be used to seize investment opportunities aligned with the fund's objectives. However, while shareholders can buy shares at a discount, they need to consider the potential dilution of existing shares. Dilution occurs when new shares are issued, reducing the ownership percentage of existing shareholders. The fund's management argues that the benefits of the additional capital and potential investment returns outweigh the drawbacks of dilution. Nevertheless, shareholders need to evaluate whether this aligns with their investment horizon and risk tolerance. Additionally, the fact that the rights are transferable and tradeable on the NYSE provides liquidity and flexibility, which can be seen as a positive aspect. On balance, the offer could positively impact the fund's ability to grow and seize new opportunities, though investors should be mindful of the dilution effect.
The change in the record date for the July distribution to July 8, 2024, signifies an operational adjustment likely meant to align with the rights offering timeline. Shareholders should take note that the distribution of $0.54 per share will be a return of capital. A return of capital distribution means that it is sourced from the fund's capital base rather than its income or profits, which can be a tax-efficient way to receive payouts but might also indicate that the fund is returning investors' original investment. This might appeal to income-seeking investors but also raises questions about the sustainability of such distributions. Investors should evaluate the potential long-term impacts on the fund's capital structure and NAV (Net Asset Value), especially considering that future distributions may continue to be classified similarly.
The move to distribute rights allowing shareholders to buy additional shares at a discount is a common strategy used by investment funds to increase capital. This can be particularly beneficial in sectors requiring substantial capital to capitalize on investment opportunities. From a shareholder's perspective, the over-subscription privilege is noteworthy. It allows investors who fully exercise their primary rights to purchase additional shares if available, representing a chance to increase their investment at a potentially favorable price. However, it's important to assess whether the fund's track record and management's expertise justify this additional investment. Furthermore, while the subscription price mechanism ensures a discount to the market price, it also implies a complexity that requires careful consideration by retail investors to understand their actual cost versus potential benefits. Finally, the flexibility to extend or cancel the offer adds a layer of uncertainty that investors should keep in mind.
The record date for the Offer is currently expected to be June 20, 2024 (the "Record Date"). The Fund will distribute to Common Shareholders on the Record Date ("Record Date Common Shareholders") one Right for each Common Share held on the Record Date. Common Shareholders will be entitled to purchase one new Common Share for every three Rights held (1 for 3); however, any Record Date Common Shareholder who owns fewer than three Common Shares as of the Record Date will be entitled to subscribe for one Common Share. Fractional Common Shares will not be issued.
The proposed subscription period will commence on the Record Date and is currently anticipated to expire on July 17, 2024, unless extended by the Fund (the "Expiration Date"). Rights may be exercised at any time during the subscription period. The Rights are transferable and are expected to be admitted for trading on the New York Stock Exchange LLC (the "NYSE") under the symbol "NXG RT" during the course of the Offer.
The subscription price per Common Share (the "Subscription Price") will be determined on the Expiration Date, and will be equal to
Record Date Common Shareholders who exercise all of their primary subscription Rights will be eligible for an over-subscription privilege entitling Record Date Common Shareholders to subscribe, subject to certain limitations and allotment, for any additional Common Shares not purchased pursuant to the primary subscription.
The Offer will be made only by means of a prospectus supplement and accompanying prospectus. The Fund expects to mail subscription certificates evidencing the Rights and a copy of the prospectus supplement and accompanying prospectus for the Offer to Record Date Common Shareholders within
The Fund will pay expenses associated with the Offer which will be borne indirectly by the Fund's Common Shareholders.
The Fund reserves the right to modify, postpone or cancel the Offer.
July Distribution Record Date Change. The Fund has previously declared a monthly distribution of
Record Date | Ex-Dividend Date | Pay Date | Distribution | Return of Capital |
July 8, 2024 | July 8, 2024 | July 31, 2024 |
1 The return of capital estimate is based on the Fund's current anticipated earnings and profits for the fiscal year and does not include a projection of gains and losses on the sale of securities which may occur during the remainder of the year. It is currently anticipated, but not certain, that approximately
The distribution shall be paid on the payment date unless the payment of such distribution is deferred by the Fund's Board of Trustees upon a determination that such deferral is required in order to comply with applicable law or to ensure that the Fund remains solvent and able to pay its debts as they become due and continue as a going concern.
The July distribution will not be payable with respect to Common Shares that are issued pursuant to the Offer after July 8, 2024.
The information herein is not complete and is subject to change. A registration statement relating to these securities has been filed with the SEC but has not yet become effective. The securities may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective.
This document is not an offer to sell any securities and is not soliciting an offer to buy any securities in any jurisdiction where the offer or sale is not permitted. This document is not an offering, which can only be made by a prospectus supplement and accompanying prospectus, once the registration statement has become effective. Investors should consider the Fund's investment objectives, risks, charges and expenses carefully before investing. The Fund's prospectus supplement and accompanying prospectus, when available, will contain this and additional information about the Fund and additional information about the Offer, and should be read carefully before investing. For further information regarding the Offer, or to obtain a prospectus supplement and the accompanying prospectus, when available, please contact the Fund's information agent:
EQ Fund Solutions, LLC
55 Challenger Road, Suite 201
(800) 290-6429
About NXG Investment Management
The Investment Adviser is an SEC-registered investment adviser headquartered in
About NXG NextGen Infrastructure Income Fund
The Fund is a closed-end management investment company with an investment objective of seeking a high total return with an emphasis on current income. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least
There can be no assurance that the Fund will achieve its investment objectives. Investments in the Fund involve operating expenses and fees. The net asset value of the Fund will fluctuate with the value of the underlying securities. It is important to note that closed-end funds trade on their market value, not net asset value, and closed-end funds often trade at a discount to their net asset value. Future distributions will be made by the Fund if and when declared by the Fund's Board of Trustees, based on a consideration of number of factors, including the Fund's continued compliance with terms and financial covenants of its leverage financing facility, the Fund's net investment income, financial performance, and available cash.
There can be no assurance that the amount or timing of distributions in the future will be equal or similar to that described herein or that the Board of Trustees will not decide to suspend or discontinue the payment of distributions in the future.
The Fund utilizes leverage as part of its investment strategy. There can be no assurance that the Fund will achieve its investment objectives.
IMPORTANT INFORMATION
This press release contains certain statements that may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included herein are "forward-looking statements." Although the Fund and the Investment Adviser believe that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Fund's reports that are filed with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required by law, the Fund and the Investment Adviser do not assume a duty to update these forward-looking statements.
For information about the Fund, please contact your financial advisor.
Contact:
Blake Nelson
Cushing® Asset Management, LP
214-692-6334
www.nxgim.com
NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE |
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SOURCE Cushing® Asset Management, LP d/b/a NXG Investment Management
FAQ
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