High Income Securities Fund Announces Terms of Rights Offering

Rhea-AI Summary

The High Income Securities Fund (NYSE: PCF) announced a rights offering to shareholders as of July 8, 2024. Each shareholder will receive a non-transferable right to purchase one additional share at the greater of 97% of the volume-weighted average price over three days ending on August 9, 2024, or 85% of the net asset value (NAV) per share on the expiration date. Rights holders can also subscribe for additional shares if not fully subscribed. The offering is subject to SEC approval. Following the rights offering, a special shareholder meeting will be held to potentially approve a new investment advisory agreement with Bulldog Investors and changes to the Fund’s investment strategies. Depending on the outcome, a tender offer will be authorized to repurchase 60-90% of the shares issued in the rights offering at 98% NAV. The offering aims to expand investment opportunities and is conditional on regulatory approvals.

Positive

• Shareholders can purchase additional shares at potentially discounted prices.
• Rights holders can subscribe for more shares if not fully subscribed.
• Possible new investment advisory agreement with Bulldog Investors, LLP.
• Potential changes to investment strategies to widen investment opportunities.

Negative

• The rights offering is subject to SEC approval, adding regulatory risk.
• Potential shareholder dilution if additional shares are issued.

Insights

Financial Analyst

The High Income Securities Fund's announcement regarding the rights offering is a significant event for its shareholders and potential investors. A rights offering allows current shareholders to purchase additional shares at a discount, potentially enhancing their ownership stake. The terms specify that shareholders can buy one additional share per existing share at a price no lower than 97% of the volume-weighted average price (VWAP) over a three-day period or 85% of the net asset value (NAV), whichever is greater.

For investors, this means an opportunity to buy shares at potentially favorable prices, but it also implies a likely dilution of existing shares. Dilution occurs when new shares are issued, reducing the value of each existing share. However, the Fund's strategy to allow rights holders to subscribe for additional shares, subject to availability, could mitigate some of this dilution by spreading it across more shareholders.

Another critical point is the proposed investment advisory agreement with Bulldog Investors, LLP and the changes to the Fund’s investment strategies. These changes aim to expand investment opportunities, potentially increasing the Fund’s ability to generate higher returns. However, these changes are subject to shareholder approval, adding a layer of uncertainty.

The intended tender offer post-rights offering, where the Fund may buy back a significant portion of newly issued shares, could support the stock price by reducing the total number of outstanding shares. This buyback is planned at a minimum of 98% of NAV, aiming to offer shareholders liquidity and support share prices.

Overall, the rights offering presents a mixed bag of opportunities and risks. Shareholders might benefit from purchasing additional shares at a discount, but they should also be cautious of the potential dilution and the need for successful strategy changes to realize long-term gains.

Market Research Analyst

The announcement indicates that the High Income Securities Fund is looking to increase its capital base through a rights offering. This move is often seen when a fund or company seeks to finance new projects or investments without taking on additional debt. The planned changes to the Fund's investment strategies and policies, pending shareholder approval, suggest a shift to more diverse and potentially higher-yielding investments. This could be an attractive proposition for current and new investors if executed well.

However, rights offerings also come with market sentiment risks. Investors might perceive the need for additional capital as a sign that the Fund may not be performing optimally. Moreover, the expansion of investment strategies introduces new risk profiles and operational complexities that require effective management oversight to succeed.

The special meeting after the rights offering to discuss these changes underscores the need for investor alignment with the Fund's vision. The proposal's success could hinge on how well the Fund communicates the benefits of these changes to shareholders. The subsequent tender offer to purchase newly issued shares at a price close to NAV could act as a price support mechanism, potentially stabilizing the market value of shares post-issuance.

From a market perspective, this rights offering might attract attention if Bulldog Investors, LLP has a strong track record. The Fund's ability to deliver on the proposed investment strategy changes will also be a deciding factor in how this move is perceived in the long term.

NEW YORK--(BUSINESS WIRE)-- High Income Securities Fund (“the Fund”) (NYSE: PCF) announced today that its Board of Trustees has authorized the issuance of one non-transferable right for each share of the Fund held on July 8, 2024 to purchase one additional share of the Fund at the greater of (1) 97% of the volume weighted average price of the Fund’s shares for the three-day period ending on the expiration date, and (2) 85% of the net asset value (NAV) of the Fund’s shares on the expiration date of August 9, 2024 unless extended. Rights holders that fully exercise their rights will also be entitled to subscribe, subject to certain limitations to be set forth in a prospectus (which shall be available on the website of the Securities and Exchange Commission at www.sec.gov) and subject to allotment, for additional shares that are not subscribed for by other rights holders. If there are not enough unsubscribed shares available to honor all additional subscription requests, the Fund may, in its sole discretion, issue additional shares up to 10% of the shares initially available in the offering. Commencement of the rights offering is subject to the Securities and Exchange Commission declaring the registration statement effective for the securities to be issued via the rights offering.

Subject to shareholder approval, the Board has approved (1) the Fund entering into an investment advisory agreement with Bulldog Investors, LLP, and (2) changes to the Fund’s investment strategies and fundamental policies in order to expand the types of investments the Fund can make and to increase the Fund’s ability to pursue attractive investment opportunities. After completion of the rights offering the Fund intends to hold a special meeting of shareholders to consider proposals to approve these changes.

Shortly after the special meeting, the Board intends to authorize a tender offer by the Fund to purchase at least (a) 90% of the number of shares issued in the rights offering if the proposals are adopted, or (b) 60% of the number of shares issued in the rights offering if the proposals are not adopted, at a price of at least 98% of NAV. The foregoing does not constitute a tender offer or an offer to purchase any shares of the Fund. Any such offer will be made pursuant to separate tender offer materials complying with the requirements of Section 13(e) of the Securities Exchange Act of 1934, as amended and Rule 13e-4 thereunder.

This press release does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities, nor shall there be any sale, issuance or transfer of securities in contravention of applicable law. The rights offering is subject to an effective registration statement covering the rights and shares to be issued and to other customary regulatory filings and approvals. Any rights offering conducted by the Fund will be made only by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

For more information, please call InvestorCom, the Fund’s information agent, at (877) 972-0090.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240625793364/en/

Noah Davis, (414) 516-1696

Source: High Income Securities Fund

FAQ

What is the date for the rights offering by High Income Securities Fund (PCF)?

The rights offering is for shareholders of record on July 8, 2024.

What are the terms of the High Income Securities Fund (PCF) rights offering?

Shareholders can purchase one additional share at the greater of 97% of the volume-weighted average price over three days ending on August 9, 2024, or 85% of the net asset value (NAV) per share on the expiration date.

What happens if all rights are not fully exercised in the High Income Securities Fund (PCF) rights offering?

Rights holders who fully exercise their rights can subscribe for additional shares if they are not fully subscribed.

What conditions must be met for the High Income Securities Fund (PCF) rights offering?

The rights offering is subject to SEC approval and other customary regulatory filings and approvals.

What changes are proposed for High Income Securities Fund (PCF) following the rights offering?

Proposals include a new investment advisory agreement with Bulldog Investors and changes to the Fund’s investment strategies to expand investment opportunities.