NEW YORK--(BUSINESS WIRE)--Taxable closed-end funds (CEFs) have issued over $1.1 billion of private notes and preferred stock to insurance companies year to date. The investor group has broadened and the securities are pricing at tighter spreads.
Bank funding (i.e. facility, prime brokerage, and repos) is up over $2.2 billion over the same time period. The sector has refinanced another $400 million of auction preferred stock (ARPS) using various tender offers at or below par, leaving just $2.8 billion across 19 funds today.
In the municipal sector, CEFs have issued $3.7 billion in new preferred this year, which were sold to banks, money market funds and retail investors. The issuances were driven mostly by the need to refinance existing obligations, issue new leverage, and use proceeds to redeem ARPS. Overall the sector has refinanced about $500 million of ARPS across seven funds leaving $3.7 billion today.
With the implementation of the Volcker rule approaching in July of 2015, Fitch expects the municipal sector to transition its $10 billion of TOB floaters into third-party sponsored conduits instead of banks. Fitch expects to publish a broader comment piece over the coming months on the topic.
Fitch presented this market update with Capital Link on Sept 30, 2014. An audio replay and transcript may be accessed at the following link: http://webinars.capitallink.com/2014/fitch2/index.html.
Readers may also access a pdf copy of the Fitch slidedeck titled 'Closed-End Fund Issuance of Debt and Preferred Stock' at 'www.fitchratings.com'.
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Applicable Criteria and Related Research: Closed-End Fund Issuance of Debt and Preferred Stock
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