Morgan Stanley says 10 closed-end municipal funds may redeem some auction-rate preferreds

By Laura Lutz

Des Moines, April 24 - Morgan Stanley said that the boards of trustees for 10 closed-end municipal funds approved the use of alternative sources of leverage, which will enable the funds to redeem a portion of their outstanding auction-rate preferred shares.

The affected funds are Morgan Stanley's Insured Municipal Trust, Insured Municipal Bond Trust, Insured Municipal Income Trust, California Insured Municipal Income Trust, Quality Municipal Income Trust, Quality Municipal Investment Trust, Quality Municipal Securities, California Quality Municipal Securities, New York Quality Municipal Securities and Municipal Premium Income Trust.

Specifically, the boards approved the use of tender option bonds to refinance up to 30% of each fund's auction-rate preferred securities leverage.

There is no specific timetable for the planned redemptions. The timing and amount of the redemptions will depend on factors including the availability of acceptable terms for the tender option bonds and market conditions.

In a news release, the boards said they believe that "in light of the continued failed ARPS auctions, it is appropriate for the funds to seek other sources of leverage to provide liquidity for ARPS shareholders while retaining the benefits of leverage for the common shareholders."

Morgan Stanley is a New York-based financial services company.

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