SCHEDULE: Bank of America Acquires BlackRock Municipal Preferred Shares

Bank of America Corporation and its subsidiary Banc of America Preferred Funding Corp disclosed the acquisition of 100% of the Variable Rate Demand Preferred Shares in BlackRock 2037 Municipal Target Term Trust for $50 million.

Summary

• Bank of America Corporation (BAC) and Banc of America Preferred Funding Corporation (BAPFC) are the reporting persons for this filing.
• BAPFC purchased 500 Variable Rate Demand Preferred Shares (VRDP Shares) of BlackRock 2037 Municipal Target Term Trust.
• The aggregate amount of funds used for the purchase was approximately $50,000,000, sourced from the working capital of the Reporting Persons.
• BAPFC beneficially owns 100.0% of this class of securities, totaling 500 shares, with shared voting and dispositive power.
• The acquisition was made for investment purposes and not with the intent to change or influence control of the issuer.
• Certain preferred class voting rights on the VRDP Shares were assigned to a Voting Trust, with Newport Trust Company acting as voting trustee and consultant.
• Voting and consent rights not assigned to the Voting Trust have been retained by BAPFC.
• The VRDP Shares benefit from a liquidity purchase obligation provided by The Bank of New York Mellon (BNY) and Bank of America, N.A. (BANA).
• BofA Securities, Inc. (BofA) acts as the remarketing agent for the VRDP Shares.

Sentiment

Score: 7

Explanation: The filing details a significant investment by Bank of America in preferred shares of a BlackRock municipal trust for investment purposes, indicating a strategic allocation of working capital into a potentially stable, income-generating asset. The structured nature of the VRDPs with liquidity and remarketing agreements suggests a well-managed investment.

Positives

• The investment represents a strategic allocation of working capital into a potentially stable, income-generating asset class (municipal preferred shares).
• The VRDP Shares are structured with a liquidity purchase obligation, providing a mechanism for marketability and risk management.
• The involvement of BANA as a liquidity provider and BofA as a remarketing agent, both affiliates of Bank of America, streamlines the management and support for these shares.

Negatives

• No explicit negatives are detailed in the filing, as it primarily serves as a disclosure of an investment.

Risks

• The filing does not detail specific risks associated with the investment in the VRDP Shares or the BlackRock 2037 Municipal Target Term Trust.

Future Outlook

The filing indicates that the VRDP Shares were purchased for investment purposes, suggesting an intent to hold these assets for their income-generating potential. No specific forward-looking statements regarding future performance or strategic shifts are provided beyond this investment intent.

Management Comments

• "The Reporting Persons declare that neither the filing of this Statement nor anything herein shall be construed as an admission that such person is, for the purposes of Section 13(d) of the Exchange Act or any other purpose, (i) acting (or has agreed or is agreeing to act together with any other person) as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of securities of the Company or otherwise with respect to the Company or any securities of the Company or (ii) a member of any group with respect to the Company or any securities of the Company."
• "BAPFC has purchased the VRDP Shares for investment purposes."
• "The Reporting Persons have not acquired the subject securities with any purpose, or with the effect of, changing or influencing control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect."

Industry Context

This filing reflects a common strategy among large financial institutions like Bank of America to invest in municipal preferred shares. Such investments are typically pursued for their stable income generation, potential tax advantages, and role in managing overall liquidity and asset allocation within a diversified financial services portfolio. The use of VRDPs with liquidity and remarketing features is a standard mechanism in the municipal bond market to enhance the marketability and manage the interest rate risk of these securities.

Comparison to Industry Standards

• Investment in municipal preferred shares by large financial institutions like Bank of America is a common strategy for managing liquidity and generating stable, potentially tax-advantaged income, aligning with typical asset allocation strategies for diversified financial services firms.
• The establishment of a liquidity purchase obligation with Bank of New York Mellon and Bank of America, N.A., and a remarketing agreement with BofA Securities, Inc., are standard structural enhancements for Variable Rate Demand Preferred Shares (VRDPs) in the municipal bond market, designed to maintain marketability and manage interest rate risk, comparable to similar arrangements seen with other institutional investors and municipal trusts.

Corporate Governance

Legal Proceedings

• The filing refers to Schedule II for details on criminal and civil proceedings involving the Reporting Persons and Listed Persons; however, no new or specific legal proceedings are detailed within the provided text of the filing.

Related Party Transactions

• Bank of America, N.A. (BANA), an affiliate of Bank of America Corporation, acts as a liquidity provider for the VRDP Shares.
• BofA Securities, Inc. (BofA), an affiliate of Bank of America Corporation, acts as the remarketing agent for the VRDP Shares.

Stakeholder Impact

• **Shareholders (Bank of America Corporation):** The allocation of $50 million in working capital to a structured investment in municipal preferred shares is a strategic move that could contribute to stable income generation for the corporation.
• **Shareholders (BlackRock 2037 Municipal Target Term Trust):** The acquisition of 100% of a class of preferred shares by a major financial institution like Bank of America could be viewed as a validation of the trust's financial instruments and underlying assets.
• **Creditors (BlackRock 2037 Municipal Target Term Trust):** The presence of a major financial institution as a significant preferred shareholder, coupled with liquidity support from BNY and BANA, may enhance the perceived stability of the trust's capital structure.

Next Steps

• Ongoing management of the investment in the Variable Rate Demand Preferred Shares by Banc of America Preferred Funding Corporation.

Key Dates

Keywords

BlackRock, Municipal Target Term Trust, Variable Rate Demand Preferred Shares, VRDP, Bank of America, BAPFC, Schedule 13D, Investment, Preferred Stock, Fixed Income, Beneficial Ownership