8-K: Advent Convertible and Income Fund Announces Rights Offering to Raise Capital

Advent Convertible and Income Fund is launching a rights offering to allow existing shareholders to purchase additional shares.

Summary

• Advent Convertible and Income Fund has announced a rights offering, allowing current shareholders to purchase additional common shares.
• The offering provides one transferable right for each common share held on the record date of September 20, 2024.
• Shareholders can purchase one new common share for every three rights held.
• The offering aims to issue up to 11,533,627 common shares.
• Shareholders who fully exercise their rights can subscribe for additional shares if any rights remain unexercised.
• The subscription price will be determined based on a formula related to the market price of the common shares.
• The rights are expected to be listed on the New York Stock Exchange under the symbol AVK RT.
• The offering is being managed by UBS Securities LLC as the dealer manager.

Sentiment

Score: 7

Explanation: The document is a standard announcement of a rights offering, which is a common practice for closed-end funds. The terms are reasonable, and the offering provides an opportunity for existing shareholders. The sentiment is neutral to slightly positive.

Positives

• Existing shareholders have the opportunity to increase their investment in the fund.
• The rights are transferable, providing flexibility for shareholders.
• The offering includes an over-subscription privilege, allowing shareholders to potentially acquire more shares.
• The rights are expected to be listed on the NYSE, providing liquidity.

Negatives

• Shareholders who do not participate in the rights offering may experience dilution of their ownership.
• The subscription price is not fixed and will be determined based on a formula, introducing some uncertainty.

Risks

• The subscription price may be higher than the current market price of the common shares.
• There is no guarantee that all shareholders will exercise their rights.
• The fund's share price may be negatively impacted by the issuance of new shares.
• The over-subscription privilege is subject to allotment, meaning not all requests may be fulfilled.

Future Outlook

The fund intends to use the proceeds from the offering to comply with the requirements of the prospectus and the Investment Company Act and to continue to qualify as a regulated investment company.

Industry Context

Rights offerings are a common method for closed-end funds to raise capital, allowing them to expand their investment portfolios or meet regulatory requirements. This offering is consistent with industry practices for funds seeking to grow their assets.

Comparison to Industry Standards

• The structure of this rights offering, with a 1-for-3 ratio and an over-subscription privilege, is fairly standard for closed-end funds.
• Comparable closed-end funds, such as those managed by BlackRock or Eaton Vance, have also used rights offerings to raise capital.
• The dealer manager fee of 3.75% is within the typical range for such offerings.
• The reallowance of selling and soliciting fees is also a common practice to incentivize broker participation.

Stakeholder Impact

• Shareholders have the opportunity to purchase additional shares, potentially increasing their investment.
• Shareholders who do not participate may experience dilution of their ownership.
• The fund will receive additional capital to invest, potentially benefiting all shareholders.
• Brokers and dealers will receive fees for soliciting the exercise of rights.

Next Steps

• Shareholders will receive subscription certificates and can choose to exercise their rights.
• The rights are expected to be listed on the NYSE under the symbol AVK RT.
• The subscription period will end on October 17, 2024, unless extended.
• The fund will issue new shares after the expiration date.

Key Dates

Keywords

rights offering, common shares, shareholders, subscription rights, capital raise, UBS Securities LLC, AVK RT, NYSE