Pimco municipal closed-end funds tender for auction preferreds

New York, July 20 – Pimco announced that Pimco Municipal Income Fund, Pimco Municipal Income Fund II, Pimco Municipal Income Fund III, Pimco New York Municipal Income Fund, Pimco New York Municipal Income Fund II, Pimco New York Municipal Income Fund III, Pimco California Municipal Income Fund, Pimco California Municipal Income Fund II and Pimco California Municipal Income Fund III are tendering for all of their outstanding auction rate preferred shares.

The actions were authorized by the board of directors and the tenders began on Friday, according to a news release.

The funds are each offering 85% of the liquidation preference for the preferreds, or $21,250 per $25,000 liquidation preference share.

The offers will end at 5 p.m. ET on Sept. 11.

Holders who participate will also receive accrued dividends through the expiration date.

Completion of the tenders will be contingent on the placement of new variable rate muni term preferred shares with a liquidation preference at least equal to that of the preferreds that are tendered.

In the offer to purchase, Pimco said that since 2008 the auctions to set the dividend on the preferreds have consistently failed because of insufficient demand.

It believes those failures will continue and also that the preferreds are generally illiquid.

Until recently, Pimco believed it was not possible to carry out a tender offer at a price that was adequately discounted.

However Wells Fargo Clearing Services, LLC and WFC Holdings, LLC, which are “substantial” beneficial holders of each fund’s preferreds, have now reached an agreement with the funds and Pimco to tender all of their holdings and purchase new preferreds, according to the offer document.

As a result, Pimco now believes the tender offers are viable.

Wells Fargo owns 9% of Pimco Municipal Income Fund’s preferreds, 14% of Pimco Municipal Income Fund II’s preferreds, 14% of Pimco Municipal Income Fund III’s preferreds, 18% of Pimco California Municipal Income Fund’s preferreds, 20% of Pimco California Municipal Income Fund II’s preferreds, 19% of Pimco California Municipal Income Fund III’s preferreds, 1% of Pimco New York Municipal Income Fund’s preferreds, 12% of Pimco New York Municipal Income Fund II’s preferreds and 1% of Pimco New York Municipal Income Fund III’s preferreds.

Deutsche Bank Trust Co. Americas is tender agent.

Pimco is a Newport Beach, Calif.-based investment manager.

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