Have regulators issued relief to give funds more flexibility to replace auction preferred stock with debt?
Yes. The SEC recently permitted one group of related funds to use more debt than otherwise permitted by the Investment Company Act for the purpose of redeeming auction market preferred stock. As discussed above, funds are required by the Investment Company Act to have at least $2 of assets for each $1 of preferred stock issued and $3 of assets for each $1 of debt issued. The SEC allowed the requesting funds to temporarily apply the lower asset coverage requirement for preferred stock to debt obtained to redeem auction market preferred stock.
Related Questions
- Does the senior preferred stock purchase agreement protect debt and mortgage backed securities issued or maturing after 2009?
- Have regulators issued relief to give funds more flexibility to replace auction preferred stock with debt?
- Are these funds using munifund term preferred shares to redeem auction market preferred stock?
