Quick Note On BlackRock CEF Repurchases

<iframe src=”//rcm-na.amazon-adsystem.com/e/cm?o=1&p=22&l=ur1&category=homegarden&banner=02NMTC702K4D0VHE1SR2&f=ifr&linkID=17e0b4ac3a719000706e772761d8ae0e&t=forexz-20&tracking_id=forexz-20″ width=”250″ height=”250″ scrolling=”no” border=”0″ marginwidth=”0″ style=”border:none;” frameborder=”0″></iframe>

BlackRock CEFs renew share repurchase programs

In this week’s Weekly Closed-End Fund Roundup, we noted that BlackRock announced the renewal of share purchases in its closed-end fund line-up.

According to the press release:

Certain BlackRock Closed-End Funds Announce Renewal of Share Repurchase Programs

September 05, 2019 05:30 PM Eastern Daylight Time

NEW YORK–(BUSINESS WIRE)–BlackRock Advisors, LLC announced today that the Boards of Directors/Trustees of sixty four BlackRock municipal, taxable fixed-income, and equity closed-end funds (the “Funds”) have authorized the renewal of open market share repurchase programs (the “Repurchase Programs”). Under each Fund’s current Repurchase Program, each Fund may repurchase, through November 30, 2019, up to 5% of its outstanding common shares (based on common shares outstanding on November 30, 2018) in open market transactions. Pursuant to the Board’s renewal of the Repurchase Programs, commencing on December 1, 2019, each Fund may repurchase up to 5% of its outstanding common shares (based on common shares outstanding on November 30, 2019) in open market transactions through November 30, 2020. The Repurchase Programs seek to enhance shareholder value by purchasing Fund shares trading at a discount from their net asset value (“NAV”) per share, which could result in incremental accretion to a Fund’s NAV.

The Funds that have authorized the renewal of a Repurchase Program are as follows:

Municipal Funds

Ticker (NYSE)

Fund

CUSIP

BFZ

BlackRock California Municipal Income Trust

09248E102

BKN

BlackRock Investment Quality Municipal Trust, Inc.

09247D105

BTA

BlackRock Long-Term Municipal Advantage Trust

09250B103

BZM

BlackRock Maryland Municipal Bond Trust

09249L105

MHE

BlackRock Massachusetts Tax-Exempt Trust

09258E109

MUI

BlackRock Muni Intermediate Duration Fund, Inc.

09253X102

MNE

BlackRock Muni New York Intermediate Duration Fund, Inc.

09255F109

MUA

BlackRock MuniAssets Fund, Inc.

09254J102

BBK

BlackRock Municipal Bond Trust

09249H104

BAF

BlackRock Municipal Income Investment Quality Trust

09250G102

BBF

BlackRock Municipal Income Investment Trust

09248H105

BYM

BlackRock Municipal Income Quality Trust

092479104

BFK

BlackRock Municipal Income Trust

09248F109

BLE

BlackRock Municipal Income Trust II

09249N101

MEN

BlackRock MuniEnhanced Fund, Inc.

09253Y100

MUC

BlackRock MuniHoldings California Quality Fund, Inc.

09254L107

MHD

BlackRock MuniHoldings Fund, Inc.

09253N104

MUH

BlackRock MuniHoldings Fund II, Inc.

09253P109

MFL

BlackRock MuniHoldings Investment Quality Fund

09254P108

MUJ

BlackRock MuniHoldings New Jersey Quality Fund, Inc.

09254X101

MHN

BlackRock MuniHoldings New York Quality Fund, Inc.

09255C106

MUS

BlackRock MuniHoldings Quality Fund, Inc.

09254A101

MUE

BlackRock MuniHoldings Quality Fund II, Inc.

09254C107

MVF

BlackRock MuniVest Fund, Inc.

09253R105

MVT

BlackRock MuniVest Fund II, Inc.

09253T101

MZA

BlackRock MuniYield Arizona Fund, Inc.

09254K109

MYC

BlackRock MuniYield California Fund, Inc.

09254M105

MCA

BlackRock MuniYield California Quality Fund, Inc.

09254N103

MYD

BlackRock MuniYield Fund, Inc.

09253W104

MYF

BlackRock MuniYield Investment Fund

09254R104

MFT

BlackRock MuniYield Investment Quality Fund

09254T100

MIY

BlackRock MuniYield Michigan Quality Fund, Inc.

09254V105

MYJ

BlackRock MuniYield New Jersey Fund, Inc.

09254Y109

MYN

BlackRock MuniYield New York Quality Fund, Inc.

09255E102

MPA

BlackRock MuniYield Pennsylvania Quality Fund

09255G107

MQY

BlackRock MuniYield Quality Fund, Inc.

09254F100

MQT

BlackRock MuniYield Quality Fund II, Inc.

09254G108

MYI

BlackRock MuniYield Quality Fund III, Inc.

09254E103

BQH

BlackRock New York Municipal Bond Trust

09249P106

BSE

BlackRock New York Municipal Income Quality Trust

09249U105

BNY

BlackRock New York Municipal Income Trust

09248L106

BFY

BlackRock New York Municipal Income Trust II

09249R102

BSD

The BlackRock Strategic Municipal Trust

09248T109

BHV

BlackRock Virginia Municipal Bond Trust

092481100

Taxable Fixed-Income Funds

Ticker (NYSE)

Fund

CUSIP

BBN

BlackRock Taxable Municipal Bond Trust

09248X100

BHK

BlackRock Core Bond Trust

09249E101

HYT

BlackRock Corporate High Yield Fund, Inc.

09255P107

BTZ

BlackRock Credit Allocation Income Trust

092508100

EGF

BlackRock Enhanced Government Fund, Inc.

09255K108

FRA

BlackRock Floating Rate Income Strategies Fund, Inc.

09255X100

BGT

BlackRock Floating Rate Income Trust

091941104

BKT

BlackRock Income Trust, Inc.

09247F100

BLW

BlackRock Limited Duration Income Trust

09249W101

BIT

BlackRock Multi-Sector Income Trust

09258A107

DSU

BlackRock Debt Strategies Fund, Inc.

09255R202

Equity Funds

Ticker (NYSE)

Fund

CUSIP

BGR

BlackRock Energy and Resources Trust

09250U101

CII

BlackRock Enhanced Capital and Income Fund, Inc.

09256A109

BDJ

BlackRock Enhanced Equity Dividend Trust

09251A104

BOE

BlackRock Enhanced Global Dividend Trust

092501105

BME

BlackRock Health Sciences Trust

09250W107

BGY

BlackRock Enhanced International Dividend Trust

092524107

BCX

BlackRock Resources & Commodities Strategy Trust

09257A108

BST

BlackRock Science and Technology Trust

09258G104

BUI

BlackRock Utilities, Infrastructure & Power Opportunities Trust

09248D104

The amount and timing of any repurchases under each Fund’s Repurchase Program will be determined either at the discretion of the Fund’s management or pursuant to predetermined parameters and instructions subject to market conditions. There is no assurance that any Fund will repurchase shares in any particular amounts. A Fund’s repurchase activity will be disclosed in its shareholder report for the relevant fiscal period. Any repurchases made under any Fund Repurchase Program will be made on a national security exchange at the prevailing market price, subject to exchange requirements and certain volume and timing limitations and other regulations under federal securities laws.

A few members have asked me or in the chat that they received a notification of this press release and wasn’t sure what it meant or what they had to do about it. In short: you don’t have to do anything if you hold any of these funds.

Why is BlackRock doing this?

Why are the funds doing this? It is definitely a shareholder-friendly move as, as stated in the press release, “purchasing Fund shares trading at a discount from their net asset value (“NAV”)… could result in incremental accretion to a Fund’s NAV”. This accretion occurs because when the fund repurchases its shares, it is selling its assets at par, but repurchasing shares at a discount. In terms of mechanics, it is like the reverse of a dilutive rights offering.

As a simplified example, let’s say that an unleveraged CEF has 10 million shares outstanding with a NAV of $10, for $100 million in assets. The fund is trading at $9, or a discount of -10%. For the fund to purchase 5% of its shares (0.5 million), it would need 0.5 million * $9 = $4.5 million, which it would obtain by selling off $4.5 million of its assets. The fund is now left with $95.5 million assets on 9.5 million shares, or a NAV of $10.0526 per share, or an overall accretion of 0.526%.

Of course, this does have the affect of reducing manager’s AUM, so even with the acknowledgement that BlackRock is one of the better (albeit not particularly exciting) CEF fund sponsors out there, the cynical take would be that this program is just one of the defenses that BlackRock employs against activist investors – kind of a “don’t target our funds, we’re doing what’s right for shareholders!” move.

Of course, BlackRock is currently embroiled in a fight with the activist firm, Saba Capital Management. Most recently, Saba issues an Open Letter to the Board of MNE, BQH and BTZ demanding that they release the results of recent shareholder votes calling for tender offers at the CEFs. This Wall Street Journal article “Boaz Weinstein Hedge Fund Spars With BlackRock and Neuberger” (subscription required) goes into more detail about the current drama!

Repurchases not going to move the needle much

In any case however, these repurchase programs really don’t move the needle too much – except, perhaps, for providing the perception that the discount is being supported by the program which I guess could be a benefit in and of itself.

The reason I say this is because the repurchase amounts are relatively small, only up to 5% of total outstanding shares. Even all of these shares were repurchased at a generous -10% discount, this still only adds +0.526% to the NAV/share of the fund, as our calculation above showed.

Moreover, remember that the program is just a permission to repurchase shares and not an obligation. Take BlackRock Enhanced Equity Dividend Trust (BDJ) for example, which we currently own in our Income Generator portfolio. BDJ repurchased a grand total of zero (0) shares last year under its repurchase program! The year before, it repurchased 1.4 million shares, which is decent but only a small fraction of the 187 million shares it still has outstanding. Even if purchased at an average discount of -10%, this would have added less than +0.1% to the NAV in terms of accretion. BDJ is also fairly very liquid at 400K shares traded daily, so these purchases aren’t going to push up the market price of the fund higher, either.

(Source: BDJ annual report, 12/2018).

Still, better than nothing I suppose?

In summary: no action needed if you own any of the BlackRock funds mentioned in this press release.

Profitable CEF and ETF income and arbitrage ideas

https://static.seekingalpha.com/uploads/2019/5/2/27546953-15567808556447084.png At the CEF/ETF Income Laboratory, we manage market-beating closed-end fund (CEF) and exchange-traded fund (ETF) portfolios targeting safe and reliable ~8% yields to make income investing easy for you. Check out what our members have to say about our service.

To see all that our exclusive membership has to offer, sign up for a free trial by clicking on the button below!



Disclosure: I am/we are long THE PREMIUM PORTFOLIOS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Be the first to comment

Leave a Reply

Your email address will not be published.


*