BlackRock Advisors, LLC today announced that 44 of its tax-exempt closed-end funds (the “Funds”) received a private letter ruling (“PLR”) from the Internal Revenue Service. The PLR received by the Funds concludes that Variable Rate Demand Preferred Shares (“VRDP”) issued by a Fund, as applicable, would be treated as equity for federal income tax purposes, making it possible for the Funds to designate dividends paid to holders of VRDP as tax-exempt income.
The Funds announcing receipt of a PLR today, taken together with the eleven remaining tax-exempt funds for which the arrangement of VRDP liquidity facilities was announced on January 3, 2011, represent all BlackRock tax-exempt closed-end funds with auction rate preferred shares (“ARPS”) outstanding. To the extent that any Fund announcing receipt of a PLR today issues VRDP, it is anticipated that the proceeds of the offering will be used to redeem all of its outstanding ARPS.
There is no guarantee that all, or a portion, of the Funds will issue VRDP in reliance on the PLR. Should a Fund seek to issue VRDP, the timing of the Fund’s issuance may vary and is subject to various factors, including, but not limited to, approval by the Fund’s Board of Directors/Trustees, the availability of liquidity providers, the willingness of tax-exempt money market funds to invest in VRDP, the ability to obtain necessary ratings for the VRDP and other market conditions.
BlackRock and the Boards of Directors/Trustees of the BlackRock Closed-End Funds (the “Boards”) continue to actively explore potential alternative forms of leverage in order to provide liquidity to ARPS shareholders, including, among other things, additional VRDP issuance, other alternative preferred stock structures and the expanded use of additional forms of leverage such as tender option bonds, as appropriate. The Boards and BlackRock will determine, based on the facts and circumstances applicable to each BlackRock fund with ARPS outstanding, whether such alternative forms of leverage would be appropriate and in the best interest of the respective fund as a whole and its shareholders.
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