Pimco municipal income funds delay dividends, may look to redeem some auction-rate preferreds

By Angela McDaniels

Tacoma, Wash., Dec. 1 - Pimco said its municipal income funds have postponed the payment of the latest dividends declared on their common shares and the declaration of their next dividends.

The funds are Pimco New York Municipal Income Fund, Pimco Municipal Income Fund II, Pimco California Municipal Income Fund II, Pimco Municipal Income Fund III, Pimco California Municipal Income Fund III and Pimco New York Municipal Income Fund III.

The latest dividends were declared on Nov. 3 and would have been paid on Monday. The upcoming dividends would have been paid on Dec. 31.

Pimco said continued severe market dislocations and further erosions in the municipal bond market have caused the values of the funds' portfolio securities to decline and their asset coverage ratios to fall below 200%.

A fund is not permitted to pay or declare common share dividends unless the fund's auction-rate preferred shares have a minimum asset coverage of 200% after payment or declaration of the dividend, according to a company news release.

The funds intend to resume paying and declaring dividends as soon as possible, the release stated. They may consider other options to resume paying and declaring dividends in the future, which may include the redemption of a portion of the funds' auction-rate preferreds.

Pimco is an investment management firm based in New York.

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