SCHEDULE: TD Bank Amends Fee Agreements for Muni Bond Funds

Toronto-Dominion Bank announces amendments to fee agreements for several BlackRock Municipal Bond Trusts, including waivers on leverage and asset coverage ratios.

Summary

• This filing is an amendment to a previous Schedule 13D, specifically Amendment No. 1, concerning the Variable Rate Demand Preferred Shares (VRDP Shares) of BlackRock Virginia Municipal Bond Trust.
• The amendment relates to changes in the VRDP Fee Agreement, originally dated June 16, 2020, which has been amended by an Omnibus Amendment to Fee Agreements dated October 23, 2026.
• The Toronto-Dominion Bank (TD Bank) and its affiliates (Reporting Persons) are involved in this filing.
• The Omnibus Amendment introduces temporary waivers for certain leverage ratio (ELR) and minimum VRDP Shares Asset Coverage requirements for several BlackRock municipal bond funds.
• These waivers are effective from November 5, 2026, through January 31, 2027, with provisions for extension by mutual consent.
• Specific funds affected include BlackRock Virginia Municipal Bond Trust (BHV), BlackRock MuniYield Michigan Quality Fund, Inc. (MIY), BlackRock MuniYield Pennsylvania Quality Fund (MPA), BlackRock MuniYield Quality Fund, Inc. (MQY), BlackRock MuniYield Quality Fund III, Inc. (MYI), and BlackRock MuniYield New York Quality Fund, Inc. (MYN).
• The filing also details the authorized signatories for TD Bank and its subsidiaries, including Christina Petrou and Andre Ramos.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a neutral to slightly negative filing due to the focus on amendments to fee agreements and waivers, indicating potential underlying issues or adjustments in financial arrangements rather than positive operational news.

Positives

• The amendment provides temporary waivers for leverage and asset coverage ratios, potentially offering flexibility to the affected BlackRock funds during the specified period.
• The fee agreements are being amended, which can sometimes lead to more favorable terms or adjustments to align with current market conditions.

Negatives

• The need for waivers on leverage and asset coverage ratios suggests that the affected funds may be facing or are at risk of breaching their standard financial covenants.
• The temporary nature of these waivers implies that the underlying financial pressures or risks have not been permanently resolved.
• The filing indicates a period of potential financial strain or regulatory scrutiny for the involved BlackRock funds.

Risks

• The temporary waivers on Leverage Ratio (ELR) and Minimum VRDP Shares Asset Coverage could indicate that the funds are struggling to maintain their required financial metrics, potentially due to market volatility or underperformance.
• If the funds fail to meet the waived requirements within the cure periods, they may be forced to redeem VRDP Shares, which could impact liquidity and operations.
• The reliance on waivers suggests a potential for future covenant breaches if market conditions do not improve or if the funds' performance deteriorates further.

Future Outlook

The filing indicates a temporary period (November 5, 2026, to January 31, 2027) during which specific leverage and asset coverage ratios are waived or modified for several BlackRock municipal bond funds. Upon expiration of these waivers, the original terms of the fee agreements will be reinstated. The success of these waivers depends on the funds' ability to manage their financial metrics within the specified cure periods.

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 (the ELR Waiver Effective Period), 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. Unless the Fund receives the prior written consent of the Liquidity Provider, the Funds Effective Leverage Ratio shall not exceed 48%; provided, however in the event that the Fund's Effective Leverage Ratio exceeds 48% as of the close of business on any Business Day, the Fund shall cause its Effective Leverage Ratio to be 48% or lower within fifteen (15) Business Days (Effective Leverage Ratio Cure Period).
• 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. The Fund shall maintain Minimum VRDP Shares Asset Coverage of 208% or, if it does not cure a failure to maintain the Minimum VRDP Shares Asset Coverage by the Minimum VRDP Shares Asset Coverage Cure Date, the Fund shall immediately commence a redemption of VRDP Shares, as provided in Section 10(b)(i) of Part I of the Statement, out of funds legally available for the redemption of VRDP Shares and in accordance with any other applicable law restrictions that apply to redemptions of shares of stock.

Industry Context

StockSavvy.ai notes that amendments to fee agreements and waivers of financial covenants are not uncommon in the closed-end fund and preferred securities space, particularly during periods of market stress or when specific fund strategies are under pressure. The involvement of a major liquidity provider like TD Bank highlights the interconnectedness of financial institutions and fund structures.

Comparison to Industry Standards

• The standard Leverage Ratio (ELR) for similar closed-end funds can vary, but exceeding 48% without waivers might indicate higher risk-taking or market-induced leverage challenges.
• A Minimum VRDP Shares Asset Coverage of 208% is a common covenant for preferred shares, designed to provide a significant buffer. Failure to meet this standard, as suggested by the need for waivers, is a deviation from typical operational stability.
• Competitors like BlackRock's other municipal bond funds or similar offerings from PIMCO, Nuveen, or Franklin Templeton would typically aim to maintain these covenants without requiring waivers, reflecting a stronger financial position or different risk management strategies.

Corporate Governance

Legal Proceedings

• Schedule II of the filing states that during the last five years, the Toronto-Dominion Bank and its affiliates, nor their executive officers, directors, or controlling persons, have been convicted in a criminal proceeding or been a party to a civil proceeding that resulted in judgments, decrees, or final orders enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Stakeholder Impact

• Shareholders of the affected BlackRock municipal bond funds may experience increased risk due to the temporary waivers, as these could indicate financial strain or potential for future performance issues.
• Holders of the Variable Rate Demand Preferred Shares (VRDP Shares) are directly impacted by the maintenance of Minimum VRDP Shares Asset Coverage, as failure to meet this could lead to redemptions.
• TD Bank, as the Liquidity Provider, is directly involved in negotiating these waivers, indicating its significant role in the financial stability of these funds.

Next Steps

• The affected BlackRock funds must ensure their Effective Leverage Ratio remains at or below 48% within 15 business days if it exceeds this level during the waiver period.
• The funds must maintain Minimum VRDP Shares Asset Coverage of 208% or face immediate redemption of VRDP Shares.
• The waivers are in effect from November 5, 2026, through January 31, 2027, with the possibility of extension by mutual written consent.
• Upon expiration of the waiver periods, the original terms of Section 6.18 (Leverage Ratio) and Section 6.23 (Minimum VRDP Shares Asset Coverage) of the respective agreements will automatically be reinstated.

Key Dates

Recommendation

The filing is primarily administrative, detailing amendments to fee agreements and waivers of financial covenants. While the waivers themselves are a negative signal suggesting potential financial stress in the underlying funds, they are temporary and do not represent a fundamental change in the business operations or long-term strategy of the issuer or the reporting persons. The lack of new financial performance data or strategic shifts warrants a 'hold' recommendation, pending further information on the funds' performance and the resolution of these covenant issues.

Keywords

VRDP Shares, Fee Agreement Amendment, Leverage Ratio Waiver, Asset Coverage Waiver, Municipal Bond Fund, Toronto-Dominion Bank, BlackRock, Schedule 13D Amendment