SCHEDULE 13D/A: Saba Capital Enters Standstill Agreement with Blackrock California Municipal Income Trust, Withdraws Shareholder Proposal

Saba Capital Management, L.P. has entered into a standstill agreement with Blackrock California Municipal Income Trust, agreeing to certain restrictions on its activist activities and withdrawing a previously submitted shareholder proposal.

Summary

• Saba Capital Management, L.P., along with Saba Capital Management GP, LLC and Boaz R. Weinstein (collectively, the "Reporting Persons"), beneficially own 5,200,088 Common Shares of Blackrock California Municipal Income Trust, representing 17.3% of the outstanding shares.
• The percentage ownership is calculated based on 30,063,645 common shares outstanding as of July 31, 2024, as disclosed in the company's N-CSR filed on October 3, 2024.
• Approximately $56,923,695 was paid to acquire the Common Shares held by the Reporting Persons.
• On January 20, 2025, Saba Capital Management, L.P. entered into a standstill agreement with Blackrock California Municipal Income Trust and BlackRock Advisors, LLC.
• The standstill agreement's "Effective Period" extends from January 20, 2025, through the day following the completion of the Fund's 2027 annual meeting of shareholders or August 31, 2027, whichever is earlier.
• In connection with the agreement, Saba Capital withdrew a shareholder proposal it had previously submitted to the Issuer on October 9, 2024, pursuant to Rule 14a-8.
• During the Effective Period, Saba Capital is restricted from engaging in various activist activities, including proxy solicitations, forming groups, seeking board representation, making shareholder proposals, or publicly influencing the Fund's management or policies.
• Saba Capital is obligated to vote its beneficially owned shares (excluding Saba RICs) at all annual and special meetings in favor of the Board's trustee nominees, against opposing proposals, and in accordance with the Board's recommendations on other matters.
• Both Saba Capital and the Fund/Advisor are restricted from making public statements that disparage the other party, with exceptions for ongoing litigation related to BlackRock ESG Capital Allocation Term Trust (ECAT) and BlackRock Municipal Income Fund, Inc. (MUI).

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The filing indicates the resolution of a potential activist conflict through a standstill agreement, which brings stability and removes a potential overhang for the company. This is generally viewed favorably by investors as it reduces uncertainty.

Positives

• The execution of a standstill agreement resolves a potential activist conflict with a significant shareholder, Saba Capital, providing stability for the Fund's management and operations.
• Saba Capital's withdrawal of its shareholder proposal removes a potential source of contention and distraction for the Fund's Board and management.
• The agreement includes provisions for Saba Capital to vote its shares in alignment with the Board's recommendations on key matters, including trustee elections, which supports current governance.

Negatives

• The document does not present any explicit negative outcomes for the company; rather, it details the resolution of a potential conflict.

Risks

• The primary risk addressed by this filing is the potential for ongoing shareholder activism from Saba Capital, which has now been mitigated by the standstill agreement.
• While not a direct risk to the Issuer from this filing, the document notes exceptions to non-disparagement clauses for ongoing or future litigation involving BlackRock ESG Capital Allocation Term Trust (ECAT) and BlackRock Municipal Income Fund, Inc. (MUI), indicating broader legal contexts for BlackRock entities.

Future Outlook

The standstill agreement establishes a period of stability for Blackrock California Municipal Income Trust, lasting until at least the day following its 2027 annual meeting of shareholders or August 31, 2027. During this time, Saba Capital is restricted from engaging in activist behaviors and is committed to voting its shares in alignment with the Board's recommendations, suggesting a period of reduced shareholder conflict.

Management Comments

• The agreement was signed by John Perlowski, President and Chief Executive Officer of BlackRock California Municipal Income Trust, and Managing Director of BlackRock Advisors, LLC, indicating management's consent and participation in the resolution.

Industry Context

This filing reflects a common trend in the closed-end fund industry where activist investors, like Saba Capital, acquire significant stakes and then engage with fund management, often leading to standstill agreements. Such agreements typically aim to resolve potential conflicts, provide governance stability, and sometimes precede other corporate actions like tender offers or share repurchases, though none are explicitly mentioned here. The resolution of an activist campaign through a standstill agreement is generally viewed positively as it reduces uncertainty and potential disruption.

Comparison to Industry Standards

• The 17.3% stake held by Saba Capital is a substantial activist position, comparable to other significant activist campaigns seen in the closed-end fund space, where investors often target funds trading at a discount to Net Asset Value (NAV).
• Standstill agreements are a standard mechanism for resolving activist disputes, similar to those seen with other closed-end funds facing activist pressure, such as those involving Bulldog Investors or Western Asset Management funds.
• The duration of the standstill agreement, extending to 2027, is a typical timeframe for such agreements, providing a multi-year period of governance stability.

Corporate Governance

Legal Proceedings

• The standstill agreement includes specific carve-outs allowing for ongoing or future litigation between Saba and its affiliates, on one hand, and BlackRock ESG Capital Allocation Term Trust (ECAT) and BlackRock Municipal Income Fund, Inc. (MUI) and their respective trustees/directors, on the other hand. This indicates that while the standstill applies to Blackrock California Municipal Income Trust, Saba's broader legal activities with other BlackRock-advised entities are not restricted by this specific agreement's non-disparagement clauses.

Stakeholder Impact

• **Shareholders**: The agreement provides clarity and stability regarding a significant activist investor's intentions, potentially reducing uncertainty and volatility. Saba Capital's commitment to vote with the Board's recommendations may reassure other shareholders regarding governance.
• **Management/Board**: The agreement reduces the immediate pressure from a prominent activist investor, allowing management and the Board to focus on the Fund's operations without the distraction of a proxy contest or other activist campaigns.

Next Steps

• The Fund is expected to file a current report on Form 8-K disclosing the entry into this agreement no later than one business day following January 20, 2025.
• Saba Capital is required to promptly prepare and file an amendment to its Schedule 13D reporting the entry into this agreement and attaching a copy of the agreement as an exhibit.
• Saba Capital will adhere to the terms of the standstill agreement, including voting its shares in accordance with the Board's recommendations, until the end of the Effective Period (latest August 31, 2027).

Key Dates

Recommendation

Keywords

Saba Capital Management, Blackrock California Municipal Income Trust, Standstill Agreement, Shareholder Activism, SEC Filing, Schedule 13D, Corporate Governance, Closed-End Fund, Proxy Voting, Investment Management