Pimco Says Closed-End Funds Delay Dividend Payments
March 5th, 2009Bond rumblings…
Via: Bloomberg:
Pacific Investment Management Co. said three of its closed-end funds had postponed dividend payments declared Feb. 2 because they failed to meet the ratio of assets to borrowing set by regulators.
Pimco Corporate Income Fund, Corporate Opportunity Fund and High Income Fund won’t make payments scheduled for today or for April 2, the Newport Beach, California-based company said today in a statement. High Income shares declined the most since they started trading in April 2003.
Falling debt prices have pushed closed-end funds to reduce borrowing or defer dividends to comply with U.S. securities law. Funds that issue debt are required to maintain net assets of at least 300 percent of leverage, while those that sell preferred shares must maintain a 200 percent ratio.
All three Pimco funds closed trading last week at a premium, with shares in High Income 56 percent above the value of its underlying assets. The fund fell 95 cents, or 17 percent, to $4.60 at 4:15 p.m. in New York Stock Exchange composite trading.
Pimco plans to buy back $342 million in auction-rate preferred shares issued by the three funds, as well as two others, to boost their coverage ratios, according to a statement from Allianz Global Investors. The two additional funds are Floating Rate Income Fund and Floating Rate Strategy.
The company, a unit of Munich-based Allianz SE, Europe’s largest insurer, stopped dividend payments on six closed-end municipal funds in December before buying back preferred shares and making the postponed payments.
