SCHEDULE: TD Bank Amends Fee Agreements for BlackRock Muni Funds

An omnibus amendment to fee agreements between The Toronto-Dominion Bank and several BlackRock MuniYield Funds temporarily adjusts leverage and asset coverage ratios.

Summary

• An omnibus amendment has been executed between The Toronto-Dominion Bank (TD Bank) and various BlackRock MuniYield Funds.
• The amendment, effective November 5, 2026, temporarily modifies certain fee agreements for a period through January 31, 2027, with potential extensions.
• Key changes include a temporary waiver of the Funds' Effective Leverage Ratio, allowing it to exceed 48% but requiring it to be brought down within 15 business days if it does.
• Additionally, for specific BlackRock MuniYield Funds (BHV, MIY, MPA, MYN, MQY, MYI), there's a waiver related to the Minimum VRDP Shares Asset Coverage maintenance, which is typically required to be 208%.
• Upon expiration of the waiver periods, the original terms of the fee agreements will be reinstated.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a neutral to slightly negative development, as it indicates a temporary relaxation of leverage and asset coverage ratios, suggesting potential underlying financial pressures or a proactive measure to avoid covenant breaches.

Positives

• The amendment provides temporary flexibility in leverage and asset coverage ratios, potentially preventing covenant breaches for the affected funds.
• The agreements are being amended and ratified, indicating continued operational relationships between TD Bank and the BlackRock Funds.

Negatives

• The need for a waiver on leverage ratios (exceeding 48%) and minimum asset coverage (208%) suggests that some funds may be operating close to or at their covenant limits.
• The temporary nature of the waivers implies that the underlying conditions necessitating these waivers may persist beyond the waiver period.

Risks

• If the Funds' Effective Leverage Ratio exceeds 48%, they must reduce it to 48% or lower within 15 business days, posing a short-term risk if market conditions do not improve.
• Failure to maintain Minimum VRDP Shares Asset Coverage could lead to immediate redemption of VRDP Shares, impacting liquidity and capital structure.
• The amendment is governed by New York law, and disputes will be subject to the exclusive jurisdiction of New York courts.

Future Outlook

The filing indicates a temporary adjustment to financial covenants, suggesting a focus on maintaining operational stability through a specific period. Upon expiration of the waiver periods, the original, more stringent covenants will automatically be reinstated.

Management Comments

• The parties agree that solely for the period from and including November 5, 2026 and through and including January 31, 2027, as such period may be extended by the mutual written consent by each Fund and the Liquidity Provider, Section 6.18 of each Agreement listed on Schedule B hereto, is hereby amended by deleting the paragraph therein and replacing in its stead the following: SECTION 6.18. Leverage Ratio.
• The parties agree that solely for the period from and including November 5, 2026 and through and including January 31, 2027, as such period may be extended by the mutual written consent by each Fund and the Liquidity Provider (the Minimum VRDP Shares Asset Coverage Waiver Effective Period), Section 6.23 of Agreement number 1 listed on Schedule B hereto, which relates to BlackRock Virginia Municipal Bond Trust (BHV), Section 6.23 of Agreement number 2 listed on Schedule B hereto, which relates to BlackRock MuniYield Michigan Quality Fund, Inc. (MIY), Section 6.23 of Agreement number 3 listed on Schedule B hereto, which relates to BlackRock MuniYield Pennsylvania Quality Fund (MPA), and Section 6.23 of Agreement number 6 listed on Schedule B hereto, which relates to BlackRock MuniYield New York Quality Fund, Inc. (MYN) is hereby amended by deleting the paragraph therein and replacing in its stead the following: SECTION 6.23. Maintenance of Minimum VRDP Shares Asset Coverage.

Industry Context

StockSavvy.ai notes that amendments to fee agreements, particularly those involving temporary waivers of leverage and asset coverage ratios, are not uncommon for closed-end funds, especially in periods of market volatility or when managing preferred shares. This indicates a need for flexibility to manage financial obligations and maintain operations.

Comparison to Industry Standards

• The waiver of the Leverage Ratio to allow it to exceed 48% suggests that the affected BlackRock MuniYield Funds may be operating at higher leverage levels than some industry peers, or are facing temporary pressures that necessitate this flexibility.
• The requirement for 208% Minimum VRDP Shares Asset Coverage is a standard covenant for many variable rate demand preferred share facilities, designed to protect preferred shareholders. The waiver indicates a temporary deviation from this standard for specific funds.
• Competitors in the municipal bond fund space, such as PIMCO or Nuveen, also utilize leverage and preferred stock structures, and would likely face similar covenant considerations during periods of market stress.

Legal Proceedings

• The filing references that during the last five years, the Toronto-Dominion Bank and its affiliates have not been convicted in a criminal proceeding or been a party to a civil proceeding that would require disclosure under securities laws, as per Schedule II.

Stakeholder Impact

• Shareholders of the affected BlackRock MuniYield Funds may see temporary flexibility in leverage, which could impact the risk profile of their investments.
• VRDP Shareholders are directly impacted by the Minimum VRDP Shares Asset Coverage covenants, and the waiver provides them with continued coverage under modified terms for a limited period.
• TD Bank, as the Liquidity Provider, is managing its risk exposure through these amended agreements and waivers.

Next Steps

• The Funds must ensure their Effective Leverage Ratio is at or below 48% within 15 business days if it exceeds this threshold during the waiver period.
• Upon expiration of the waiver periods (January 31, 2027, unless extended), the original Section 6.18 (Leverage Ratio) and Section 6.23 (Minimum VRDP Shares Asset Coverage) will automatically be reinstated.
• The Funds are responsible for paying the reasonable fees and expenses of TD Bank's outside counsel, capped at $25,000.

Key Dates

Keywords

Omnibus Amendment, Fee Agreements, Leverage Ratio, Asset Coverage, VRDP Shares, Toronto-Dominion Bank, BlackRock MuniYield Funds, Waiver