Saba Capital Reaches Agreement With The New America High Income Fund

Rhea-AI Summary

Saba Capital Management has entered into a standstill agreement with The New America High Income Fund (NYSE: HYB). As part of this agreement, the Fund will reorganize with and into the T. Rowe Price High Yield Fund (Nasdaq: PRHYX), pending stockholder approval.

The reorganization aims to eliminate the Fund's trading discount and reduce management fees for stockholders. Additionally, Saba will withdraw its notice to nominate individuals for election at the Fund’s 2024 Annual Meeting of Stockholders.

Paul Kazarian, Partner and Portfolio Manager of Saba, expressed satisfaction with the agreement, noting the potential benefits for stockholders.

Positive

• Reorganization with T. Rowe Price High Yield Fund aims to eliminate trading discount.
• Lower management fees for stockholders expected post-reorganization.

Negative

• None.

Financial Analyst

This agreement between Saba Capital and The New America High Income Fund (HYB) marks a significant development for closed-end fund investors. The proposed reorganization into the T. Rowe Price High Yield Fund (PRHYX) could bring several benefits:

• Elimination of trading discount: Closed-end funds often trade at a discount to their net asset value (NAV). This move to an open-end structure would allow investors to redeem at NAV, potentially unlocking value.
• Lower management fees: The mention of reduced fees is positive for stockholders, potentially improving returns over time.
• Increased liquidity: Open-end funds offer daily liquidity, which could be advantageous for some investors.

However, it's important to note that this reorganization is subject to stockholder approval. The market's reaction to this news will be telling, as it may set a precedent for other activist investors in the closed-end fund space.

Legal Expert

The standstill agreement between Saba Capital and The New America High Income Fund is a strategic legal maneuver with several implications:

• Proxy fight avoidance: Saba's withdrawal of its nomination notice suggests a mutually beneficial resolution, avoiding a potentially costly and disruptive proxy contest.
• Regulatory considerations: The reorganization from a closed-end to an open-end fund structure will require careful navigation of Investment Company Act regulations.
• Stockholder rights: The requirement for stockholder approval ensures that investors have a say in this significant structural change, aligning with corporate governance best practices.

This agreement demonstrates how activist investors can effect change through negotiation rather than confrontation, potentially setting a precedent for future fund governance disputes.

Market Research Analyst

This agreement signals a broader trend in the investment fund landscape:

• Activist pressure: Closed-end funds have increasingly become targets for activist investors seeking to narrow persistent NAV discounts.
• Fund structure evolution: The shift from closed-end to open-end structure reflects changing investor preferences for liquidity and transparency.
• Consolidation: Merging with a larger T. Rowe Price fund could provide economies of scale, potentially benefiting investors through lower costs and improved resources.

This move may prompt other closed-end fund boards to proactively address persistent discounts to avoid similar activist pressures. It's worth monitoring how this trend might reshape the $250 billion closed-end fund market in the coming years.

The New America High Income Fund to Pursue Reorganization With and Into the T. Rowe Price High Yield Fund, Subject to Stockholder Approval

NEW YORK--(BUSINESS WIRE)-- Saba Capital Management, L.P. (together with certain of its affiliates, “Saba” or “we”), today announced that it has entered into a standstill agreement with The New America High Income Fund (NYSE: HYB) (the “Fund”).

Under the terms of the agreement, The New America High Income Fund will, subject to stockholder approval, reorganize with and into the T. Rowe Price High Yield Fund, Inc. (Nasdaq: PRHYX), an open-end management investment company registered under the Investment Company Act of 1940.

The terms of the agreement also provide for Saba withdrawing the notice of its intent to nominate persons for election at the Fund’s 2024 Annual Meeting of Stockholders.

Paul Kazarian, Partner and Portfolio Manager of Saba, commented:

“Saba is pleased to have reached this agreement through constructive engagement with the Fund’s board. We believe stockholders would benefit from the proposed reorganization contemplated by the agreement, as it would eliminate the Fund’s trading discount and lower management fees for stockholders.”

About Saba Capital

Saba Capital Management, L.P. is a global alternative asset management firm that seeks to deliver superior risk-adjusted returns for a diverse group of clients. Founded in 2009 by Boaz Weinstein, Saba is a pioneer of credit relative value strategies and capital structure arbitrage. Saba is headquartered in New York City. Learn more at www.sabacapital.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808949130/en/

Longacre Square Partners

Charlotte Kiaie / Kate Sylvester, 646-386-0091

ckiaie@longacresquare.com / ksylvester@longacresquare.com

Source: Saba Capital Management, L.P.

FAQ

What is the new agreement between Saba Capital and The New America High Income Fund (HYB)?

Saba Capital has entered a standstill agreement with The New America High Income Fund, which will reorganize with and into the T. Rowe Price High Yield Fund, subject to stockholder approval.

How will the reorganization of HYB benefit stockholders?

The reorganization is expected to eliminate the Fund's trading discount and lower management fees for stockholders.

What will happen to Saba's nominations for the 2024 Annual Meeting of Stockholders?

Saba will withdraw its notice to nominate individuals for election at the Fund’s 2024 Annual Meeting of Stockholders as part of the agreement.

Which funds are involved in the HYB reorganization?

The New America High Income Fund (NYSE: HYB) will reorganize with and into the T. Rowe Price High Yield Fund (Nasdaq: PRHYX).