Highland Opportunities and Income Fund (HFRO) Announces Commencement of Tender and Exchange Offer
Rhea-AI Summary
Highland Opportunities and Income Fund (HFRO) has launched a tender and exchange offer for common shares, exchanging up to $100 million worth for newly issued Series B Preferred Shares. The exchange price is set at $10.00 per Share, offering a premium to current market price. The offer runs from February 3, 2025, to March 4, 2025.
The Series B Preferred Shares received a BBB+ Investment Grade rating from Egan-Jones and will be listed on NYSE with a 5.375% coupon and $25.00 liquidation preference. This initiative is part of HFRO's strategy to address the share price's discount to NAV and enhance shareholder value, alongside other measures including a share repurchase program and enhanced transparency efforts.
If tender requests exceed the $100 million limit, shares will be purchased on a pro rata basis. The Fund will not issue fractional Series B Preferred Shares.
Positive
- Premium exchange offer at $10.00 per share above market price
- BBB+ Investment Grade rating for new Series B Preferred Shares
- 5.375% coupon rate on Series B Preferred Shares
- Active measures to address NAV discount
- NYSE listing for new preferred shares enhancing liquidity
Negative
- exchange capacity of $100 million may lead to pro-rata allocation
- No fractional shares will be issued in the exchange
Insights
The $100 million tender and exchange offer represents a strategic move that could significantly reshape HFRO's capital structure, accounting for approximately 26% of the fund's current market capitalization. This substantial size indicates management's serious commitment to addressing the NAV discount issue.
The exchange price of
Several key implications deserve attention:
- The exchange offer could create positive pressure on the common share price as it effectively removes a significant portion of the float while providing a price floor during the tender period
- The BBB+ investment grade rating suggests strong financial fundamentals and adds credibility to the preferred shares as an investment vehicle
- Non-participating shareholders may benefit from reduced supply of common shares and potential NAV accretion, though they should consider the increased leverage effect from the preferred share issuance
- The pro-rata allocation mechanism ensures fair treatment but may result in partial execution for interested shareholders if the offer is oversubscribed
This initiative, combined with other measures like enhanced transparency and board alignment, represents a comprehensive approach to addressing the persistent NAV discount. The success of this strategy could set a precedent for other closed-end funds facing similar challenges.
The Exchange Offer is part of the ongoing, targeted strategy from the Fund's adviser, NexPoint Asset Management, L.P. (the "Adviser"), and the Board of Trustees (the "Board") to address the Share price's discount to net asset value ("NAV") and attempt to enhance long-term shareholder value. Other initiatives under this strategy include: a Share repurchase program; a commitment to enhanced transparency through quarterly calls and shareholder materials that offer in-depth information on the Fund, portfolio, and top holdings, among other communications; the formation of a dedicated Board committee to continuously assess efforts to reduce the discount; and adjustments to Board compensation to provide further alignment with HFRO shareholders. Building on these and other initiatives, the Adviser and the Board believe the Exchange Offer provides a potential solution aiming to narrow the discount to NAV, while also allowing a significant number of shareholders to tender their Shares at a significant premium to the current market price.
The Exchange Offer will begin on February 3, 2025, and expire at 5 p.m. Eastern Time on March 4, 2025 (the "Expiration Date"), unless the Exchange Offer is extended.
As previously announced, the Fund intends to acquire up to
The Series B Preferred Shares received an Investment Grade (BBB+) rating from Egan-
Terms of the Exchange Offer
Exchange Price per Common Share | |
Maximum Aggregate Purchase Price | |
Coupon of Series B Preferred Shares | 5.375 % |
Liquidation Preference of Series B Preferred Shares | |
Rating | BBB+ |
Commencement Date | February 3, 2025 |
Expiration Date | March 4, 2025 (5 p.m. EST) |
The complete details of the Exchange Offer are provided in the offering documents that are filed with the Securities and Exchange Commission ("SEC").
Information and other resources for shareholders regarding the Exchange Offer are available on the Fund's website at nexpointassetmgmt.com/opportunities-income-fund.
Additional Information
The Exchange Offer is being made on the terms and subject to the conditions set forth in the Fund's Exchange Offer Statement and related Letter of Transmittal that are being filed with the Securities and Exchange Commission ("SEC"). Once filed these will be available to view at sec.gov and on the Fund's website at nexpointassetmgmt.com/opportunities-income-fund.
The Fund's website also includes a link to sign up to receive Fund communications via email. (Shareholders can also sign up directly – here.)
For additional questions or assistance, please contact the Company's Information Agent: EQ Fund Solutions, LLC, toll-free at (866) 416-0576. Holders of Common Shares may also contact their brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Exchange Offer.
About the Highland Opportunities and Income Fund
The Highland Opportunities and Income Fund (NYSE: HFRO) is a closed-end fund managed by NexPoint Asset Management, L.P. For more information visit nexpointassetmgmt.com/opportunities-income-fund.
About NexPoint Asset Management, L.P.
NexPoint Asset Management, L.P. is an SEC-registered investment adviser. It is the adviser to a suite of registered funds, including open-end mutual funds and closed-end funds. For more information nexpointassetmgmt.com,
Risks and Disclosures
Additional terms and conditions of the Exchange Offer are set forth in the Fund's offering materials, which are being filed with the SEC and are being distributed to the Fund's common shareholders. If the number of common shares tendered for the Fund exceeds the maximum amount of the Exchange Offer, the Fund will purchase shares from tendering shareholders on a pro-rata basis (disregarding fractional common shares and fractional Series B Preferred Shares). Accordingly, there is no assurance that the Fund will purchase all of a shareholder's common shares tendered in the Exchange Offer. The Fund may determine not to accept shares tendered in the Exchange Offer under various circumstances, as are set forth in the offering materials. Further information about the Exchange Offer will be announced in future press releases and are included in the Fund's offering materials.
This press release is not a recommendation, an offer to purchase or a solicitation of an offer to sell any securities of HFRO and the above statements are not intended to constitute an offer to participate in any tender offer. The solicitation and the offer to exchange common shares of HFRO are only being made pursuant to an offer to exchange and related materials that HFRO is filing with the SEC. HFRO is filing an Exchange Offer Statement on Schedule TO containing an offer to exchange, forms of letters of transmittal and other documents relating to the Exchange Offer. HFRO is distributing these documents to the shareholders of the Fund. These documents contain important information about the Exchange Offer and shareholders of HFRO are urged to read them carefully. Investors may obtain free copies of the Exchange Offer Statement and other documents filed with the SEC at the SEC's web site at sec.gov or on the Fund's website at nexpointassetmgmt.com/opportunities-income-fund.
The Fund is relying on Section 3(a)(9) of the Securities Act of 1933 (the "Securities Act") to exempt the Exchange Offer from the registration requirements of the Securities Act. Section 3(a)(9) provides that the registration requirements of the Securities Act will not apply to "any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange." The Fund has no contract, arrangement or understanding relating to, and will not, directly or indirectly, pay any commission or other remuneration to any broker, dealer, salesperson, agent or any other person for soliciting tenders in the Exchange Offer.
Investors should consider the investment objectives, risks, charges, and expenses of the Highland Opportunities and Income Fund carefully before investing. This and other information can be found in the Fund's annual report, which may be obtained by calling (800) 357-9167 or on the website at nexpointassetmgmt.com. Please read the annual report carefully before you invest. Any distribution paid by the Fund may include a return of capital. Please refer to the 19(a)-1 Source of Distribution Notice on the NexPoint Asset Management website for Section 19 notices that provide estimated amounts and sources of the Fund's distributions, which should not be relied upon for tax reporting purposes.
CONTACTS
Investor Relations
Kristen Griffith
IR@nexpoint.com
Media Relations
comms@nexpoint.com
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SOURCE Highland Opportunities and Income Fund
FAQ
What is the exchange price per share in HFRO's 2025 tender offer?
When does HFRO's 2025 exchange offer expire?
What is the coupon rate for HFRO's new Series B Preferred Shares?
What is the maximum purchase amount for HFRO's 2025 exchange offer?
What credit rating did HFRO's Series B Preferred Shares receive?
What is the liquidation preference for HFRO's Series B Preferred Shares?
