First Trust Advisors L.P. Provides Information Relating to Auction Rate Securities
LISLE, Ill. - First Trust Advisors L.P. (“FTA”) today provides the following information related to recent developments in the market for auction rate preferred securities and auction rate notes (“auction rate securities”) with respect to the closed-end funds advised by FTA.
As has been widely reported in the financial media, the markets for auction rate securities have experienced a significant decrease in bidders at auctions, resulting in failed auctions for numerous auction rate securities of closed-end funds and other issuers, including certain recent auctions for securities of Energy Growth and Income Fund and First Trust/Four Corners Senior Floating Rate Income Fund II, two closed-end funds advised by FTA. FTA believes that the turmoil in the auction rate securities markets is related to liquidity issues in the credit markets generally and is not tied to specific closed-end funds. A failed auction is not a default nor does a failed auction trigger a redemption of the auction rate securities. Rather, holders of auction rate securities continue to receive dividend/interest payments at an annual rate that may vary for each rate period. A fund with a failed auction continues to pay on the auction rate securities at a “fail rate.” The fail rate is a pre-determined maximum rate detailed in a fund’s offering documents for the particular auction rate securities. The fail rate is generally based on a spread above a pre-determined index.
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