abrdn Income Credit Strategies Fund Stock Price, News & Analysis

abrdn Income Credit Strategies Fund (NYSE: ACP) is a diversified, closed-end management investment company. According to the fund’s disclosures, its primary investment objective is to seek a high level of current income, with a secondary objective of capital appreciation. The fund is part of the finance and insurance sector and is classified in the securities and commodity exchanges industry, reflecting its structure as an exchange-traded, closed-end fund.

The fund states that it predominantly invests in debt and loan instruments of issuers that operate in a variety of industries and geographic regions. This focus on credit instruments underpins its income-oriented strategy. As a closed-end fund, its common shares trade on the New York Stock Exchange under the symbol ACP, and the market price of those shares is influenced by factors that may be beyond the control of the fund’s board or its investment adviser. The fund notes that its shares can trade at a premium or a discount to net asset value (NAV), and that the investment return and principal value of the fund will fluctuate.

Investment objectives and strategy

The fund’s stated objective is to generate a high level of current income, while also seeking capital appreciation as a secondary goal. To pursue these objectives, it invests primarily in debt and loan instruments. The fund’s materials explain that it may invest in credit obligations or related instruments that, at the time of investment, are likely to default. In addition, as disclosed in a Form 8-K, the fund may invest up to 5% of its portfolio in credit obligations or related instruments that, at the time of investment, are in default. This reflects a strategy that permits exposure to higher-risk credit instruments within defined limits.

The fund has also described the use of leverage as part of its approach. In a press release discussing a private offering of Series A Mandatorily Redeemable Preferred Shares, the fund indicated that it anticipates its strategic use of leverage will be beneficial to income generation due to the positive interest-rate differential between the interest earned on investments and the cost of leverage. Net proceeds from that offering were expected to be used primarily to refinance existing debt and to make new portfolio investments.

Closed-end fund structure and trading

abrdn Income Credit Strategies Fund is structured as a closed-end fund whose shares are traded on a stock exchange. The fund and its advisers emphasize that closed-end funds are traded on the secondary market, and that a fund’s investment return and principal value will fluctuate so that an investor’s shares may be worth more or less than the original cost. The fund notes that shares may trade at a premium or a discount to NAV, and that there is no assurance the fund will achieve its investment objectives. These characteristics are central to understanding how ACP trades and how investors may experience gains or losses.

The fund has also established preferred share classes that trade separately from the common shares. For example, its 5.25% Series A Perpetual Preferred Shares trade on the NYSE under the symbol ACP PRA and are rated A2 by Moody’s Investors Service, with distributions paid quarterly. These preferred shares have an annual dividend rate stated in the fund’s press releases and were issued at a fixed per-share liquidation preference. The fund has also issued Series A Mandatorily Redeemable Preferred Shares in a private offering, as described in its Form 8-K and related press release, with a specified liquidation preference per share and a stated maturity date.

Capital raising and leverage activities

The fund has disclosed multiple capital-raising and leverage-related activities. In a Form 8-K, the fund reported entering into a securities purchase agreement for the issuance and sale of 4,000,000 Series A Mandatorily Redeemable Preferred Shares, due on a specified future date, with a liquidation preference of $25.00 per share. The fund received gross proceeds of $100 million from this transaction, which was conducted as a private placement under Rule 506(c) of the Securities Act of 1933. A Statement of Preferences establishing and fixing the rights and preferences of these Mandatorily Redeemable Preferred Shares was adopted and filed as an exhibit.

In a separate Form 8-K, the fund disclosed that it entered into a distribution agreement with ALPS Distributors, Inc., allowing it to offer and sell up to a specified aggregate amount of common shares in transactions deemed to be "at the market" under Rule 415. Under this arrangement, the fund may offer common shares through the distributor and a sub-placement agent, subject to the requirement under the Investment Company Act of 1940 that it may not sell common shares at a price below the current NAV of such shares, exclusive of any distributing commission or discount. The offering is made pursuant to a shelf registration statement and related prospectus and prospectus supplement.

Advisory relationships

The fund is advised by abrdn Investments Limited and sub-advised by abrdn Inc., as disclosed in its press releases. These entities are part of the group referred to as Aberdeen Investments or abrdn in the United States, which is described as the trade or marketing name for a group of affiliated, registered investment advisers. The fund’s materials highlight Aberdeen’s experience in managing closed-end funds and its role as investment adviser and sub-adviser for ACP.

Risk considerations

Across its public communications, abrdn Income Credit Strategies Fund emphasizes that there is no assurance the fund will achieve its investment objective. The fund notes that its NAV will fluctuate with the value of the underlying securities, and that closed-end funds often trade at a discount to NAV. It also states that distributions, including those on its preferred shares, may be paid from sources of income other than ordinary income, such as net realized short-term capital gains, net realized long-term capital gains, and return of capital. The actual amounts and sources of distributions for tax reporting purposes depend on the fund’s investment experience and may change based on tax regulations.

The fund cautions that investors should not draw conclusions about its investment performance from the amount of any particular distribution. It also indicates that investors should carefully consider the fund’s investment objectives, risks, charges, and expenses before investing, and that offering documents such as the prospectus and prospectus supplement provide detailed information about these factors.

Share classes and distributions

In addition to its common shares, abrdn Income Credit Strategies Fund has 5.25% Series A Perpetual Preferred Shares that pay quarterly distributions. Press releases describe the board of trustees declaring cash distributions on these preferred shares, with details about record dates, ex-dividend dates, and payment dates. The preferred shares are rated A2 by Moody’s Investors Service and were issued at $25.00 per share, with an annual dividend rate of $1.3125 per share, according to the fund’s announcements. The fund also notes that a Form 1099-DIV is sent to shareholders after the end of the calendar year, providing the amount and composition of distributions and information about their tax treatment.

Position within the abrdn fund family

abrdn Income Credit Strategies Fund is part of a broader family of closed-end funds managed or advised by abrdn-affiliated entities. Press releases referencing other abrdn funds, such as abrdn Total Dynamic Dividend Fund and abrdn Emerging Markets Ex-China Fund, indicate that closed-end funds are an important element of Aberdeen Investments’ client base in the U.S. and globally. These communications describe Aberdeen Investments as having extensive experience in managing closed-end funds dating back to the 1980s and managing multiple U.S. and non-U.S. closed-end funds. While these details relate to the broader organization, they provide context for ACP’s place within a larger platform of closed-end investment products.

Key characteristics for investors

For investors researching ACP stock, several characteristics emerge from the fund’s own disclosures:

• Structure: A diversified, closed-end management investment company whose common shares trade on the NYSE under the symbol ACP.
• Objectives: Seeks a high level of current income as its primary objective, with capital appreciation as a secondary objective.
• Portfolio focus: Predominantly invests in debt and loan instruments of issuers in various industries and geographic regions, with the ability to invest in credit obligations that are likely to default and, up to a specified limit, in obligations that are in default.
• Leverage: Uses leverage, including preferred share offerings and credit facilities, with the stated view that leverage can be beneficial to income generation when the interest-rate differential is positive.
• Advisers: Advised by abrdn Investments Limited and sub-advised by abrdn Inc., within the broader Aberdeen Investments organization.
• Trading dynamics: Shares may trade at a premium or discount to NAV, and there is no assurance the fund will achieve its investment objectives.

These elements, drawn from the fund’s press releases and SEC filings, outline how abrdn Income Credit Strategies Fund presents its strategy, structure, and risk profile to the market.