Avenue Income Credit Strategies Fund to conduct share offering

By Toni Weeks

San Diego, Feb 16 - The Avenue Income Credit Strategies Fund announced it will provide an opportunity to existing common shareholders to purchase common shares of the fund at a discount price by issuing transferable rights.

Shareholders of record as of close of business on Feb. 24 are entitled to subscribe for a total of 2,450,466 shares of the fund. Based on the average of the high and low prices of the shares on Feb. 10, the estimated price per share is $18.13 apiece, for a total offering of $44,426,949.

The subscription period runs from Feb. 24 through March 23.

The fund's board of trustees determined that it is in the best interest of the fund and its shareholders to increase the assets of the fund available for investment. The fund is primarily interested in investment opportunities in U.S. and European high-yield and leveraged loan instruments.

Using the proceeds of the offer, the fund will seek to capitalize on macroeconomic developments in the United States and Europe, any upcoming U.S. high-yield bond and institutional maturities in the less-than-favorable capital markets environment and in any potential European bank deleveraging due to the European sovereign debt crisis by investing in companies that offer attractive opportunities for yield enhancement and/or net asset value appreciation potential.

The fund will also seek to capitalize on market inefficiencies and to reallocate the portfolio of the fund to emphasize investments best suited to the current interest rate environment and market outlook.

The board said it collaborated with the fund's investment adviser, Avenue Capital Management II, LP, and subadviser, Avenue Europe International Management, LP, in deciding to increase the fund's assets.

The offering

In the offering, the holders of common shares will receive one right for each outstanding common share owned. The rights entitle the holders to purchase one new share for every three rights held. Any shareholder who holds less than three rights is entitled to subscribe for one common share, and those who fully exercise their rights will be entitled to subscribe for additional common shares covered by any unexercised rights.

The fund's shares are listed on the New York Stock Exchange under the symbol "ACP." The rights are transferable and will be listed for trading under the symbol "ACP RT" during the offering.

The subscription price will equal 90% of the average of the last reported sales price of a common share on the date on which the offer expires and the preceding four days. If the calculated subscription price is less than 80% of the NAV of the fund's common shares on the expiration date, then the subscription price will be 80% of the fund's net asset value on that day. The fund will pay a sales load on the subscription price.

The offer will expire at 5 p.m. ET on March 23, unless extended.

Fund details

The fund seeks a high level of current income with a secondary objective of capital appreciation by investing primarily in loan and debt instruments of issuers that operate in a variety of industries and geographic regions.

The fund's strategy is to invest generally in senior secured floating-rate and fixed-rate loans and in second-lien or other subordinated loans or debt instruments, including non-stressed and stressed credit obligations, and related derivatives. The fund is permitted to obtain leverage using any form or combination of financial leverage instruments and intends to have financial leverage representing up to one-third of the fund's total assets following the completion of the offer.

Effects of offering

Upon completion of the offer, common shareholders who do not fully exercise their rights will own a smaller proportional interest in the fund than they owned before the offer. The completion of the offer will result in immediate voting dilution for such common shareholders.

In addition, the sales load and the expenses associated with the offer will immediately reduce the NAV of each common shareholder's common shares. If the subscription price is less than the NAV as of the expiration date, the completion of the offer will result in an immediate dilution of the NAV for all common shareholders and may reduce the market price of the shares.

It is anticipated that the existing shareholders will experience immediate dilution even if they fully exercise their rights.

UBS Securities LLC is the dealer manager for the offer and will receive a sales load of 3.75% of the subscription price for each common share. The subscription agents are Computershare Inc. and Computershare Trust Co., NA. The information agent is Georgeson Inc.

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