MFS funds wrap tenders for auction-rate preferreds, amends bylaws

By Toni Weeks

San Diego, Sept. 12 - MFS California Municipal Fund, MFS High Income Municipal Trust and MFS Municipal Income Trust announced the final results of the tender offers for their outstanding municipal auction-rate preferred shares (ARPS). The offers, which expired at 8 a.m. ET on Sept. 12, had been extended from 8 a.m. ET on Sept. 7.

The company said in a press release by Boston-based MFS Investment Management that all shares validly tendered and not withdrawn have been accepted for payment and that all conditions to the closing of the offers have been satisfied, allowing the company to amend each fund's bylaws to replace Standard & Poor's with Fitch as a rating agency for the preferreds.

In the offers, MFS California accepted 977 ARPS, about 99.9% of its outstanding ARPS, with one ARP remaining outstanding; MFS High Income accepted for payment 3,675 ARPS, or 94.2% of its outstanding preferreds, with 225 ARPS remaining outstanding; and MFS Municipal Income has accepted for payment 4,259 ARPS, or 93.6%, of its outstanding ARPS, with 291 ARPS remaining outstanding.

As of the original Sept. 7 offer expiration, investors had tendered 98% of MFS California's preferreds, 93.8% of MFS High Income's preferreds and 93.3% of MFS Municipal Income's preferreds, according to a previous press release.

MFS also updated the results of the tender offers for MFS High Yield Municipal Trust's and MFS Investment Grade Municipal Trust's ARPS.

The MFS High Yield Municipal Trust accepted tenders for 2,844, or 94.8%, of its outstanding ARPS, up slightly from the 2,841 ARPS previously reported, by the original expiration date, while the MFS Investment Grade Municipal Trust accepted tenders for 1,917, or 98.3%, of its auction-rate preferreds. These two tender offers were not extended.

Each fund tendered for the auction-rate preferreds at 95% of the liquidation preference of $25,000 per share, or $23,750 per share, plus accrued dividends through the expiration date of the tender offer, according to a previous release. The offers began Aug. 9.

As previously noted, each tender offer was conditioned on the receipt of tenders for at least 70% of that fund's outstanding auction-rate preferreds, the private placement of new preferred shares and the approval by holders of an amendment to each fund's bylaws.

The funds announced the tender offers for the auction-rate preferreds on July 6 after receiving the approval of the board of trustees of each fund.

Meetings adjourned

As previously reported, the three funds that extended their tender offers, MFS California Municipal Fund, MFS High Income Municipal Trust and MFS Municipal Income Trust, adjourned the meetings for holders to 12:30 p.m. ET on Sept. 11 to permit the continued solicitation of additional votes.

The purpose of the special meetings was to allow the auction-rate preferred holders of each adjourned fund to vote on whether to amend each fund's bylaws to swap each fund's rating agency, a previous press release noted.

Questions about the tender offers can be directed either to Warren Antler at AST Fund Solutions, the information agent for the tender offers, at 212 400-2605, or Justin Miller of MFS at 800 343-2829, ext. 57702.

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