SCHEDULE: Saba Capital Urges BNY Mellon Funds to Merge, Nominate Trustees

Activist investor Saba Capital Management, holding 7.27% of BNY Mellon Municipal Bond Infrastructure Fund, is pushing for a merger into an open-end fund and plans to nominate trustee candidates.

Summary

• Saba Capital Management, L.P. and its affiliates beneficially own 1,337,952 common shares, representing 7.27% of BNY Mellon Municipal Bond Infrastructure Fund, Inc. (DMB).
• Saba Capital has expressed serious concerns regarding the long-term viability of DMB, BNY Mellon Strategic Municipal Bond Fund (DSM), and BNY Mellon Strategic Municipals (LEO).
• The firm intends to nominate trustee candidates at the Funds' 2026 annual meeting of shareholders.
• Saba Capital encourages the Issuer's board of trustees to proactively consider a value-enhancing merger, specifically reorganizing the Funds into BNY Mellon's AMT-Free Municipal Bond Fund (DMUAX).
• Approximately $13,764,992 was paid to acquire the reported common shares.

Sentiment

Score: 3

Explanation: The sentiment is negative towards the current management and structure of the BNY Mellon Municipal Bond Infrastructure Fund, as Saba Capital highlights significant issues like persistent NAV discounts, high expense ratios, and long-term viability concerns. The filing is an activist challenge, indicating dissatisfaction and a push for disruptive change.

Positives

• The proposed merger into DMUAX could deliver nearly 1% annual cost savings for DMB shareholders.
• A successful precedent exists with the reorganization of DMF into DMUAX earlier this year, which led to cost reductions and discount compression.
• Shareholder dissatisfaction, indicated by recent votes (DSM open-end conversion nearly passed, DMB board declassification passed), suggests potential for positive change if Saba Capital's proposals are adopted.

Negatives

• The Funds persistently trade at steep discounts to Net Asset Value (NAV), averaging around -10% over the past year.
• Expense ratios for the Funds (0.97% to 1.68%) are materially higher than similar open-ended municipal bond funds, such as BNY Mellon's AMT-Free Municipal Bond Fund (DMUAX) which charges 0.70%.
• Concerns exist regarding the long-term viability of the BNY Mellon Municipal Bond Infrastructure Fund, Inc. and related funds.
• Shareholders are described as 'trapped' due to persistent discounts to NAV.

Risks

• Long-term viability concerns for BNY Mellon Municipal Bond Infrastructure Fund, Inc. and related funds.
• Persistent trading at steep discounts to NAV, which can trap shareholders.
• Higher expense ratios compared to industry alternatives, eroding shareholder returns.
• Potential for unnecessary legal and administrative expenses if the board does not proactively consider a merger, as highlighted by Saba Capital.

Future Outlook

Saba Capital intends to nominate trustee candidates at the Issuer's 2026 annual meeting of shareholders and strongly encourages the board to proactively consider a value-enhancing merger of the BNY Mellon Municipal Bond Infrastructure Fund and related funds into BNY Mellon's AMT-Free Municipal Bond Fund (DMUAX) to achieve significant cost savings and discount compression.

Management Comments

• "We are reaching out on behalf of Saba Capital and, in our view, all shareholders to express serious concerns regarding the long-term viability of the following funds."
• "With stakes of this size, we believe we have a responsibility to advocate for changes that will benefit all shareholders by using our platform to amplify their concerns to you."
• "For months, it has been evident to us that the Funds' shareholders are dissatisfied with the current status quo and the recent shareholders votes only further underscored this."
• "Shareholders in each of the Funds remain trapped because the Funds persistently trade at steep discounts to NAV."
• "From our vantage point, the path forward here is clear and simple: if BNY Mellon reorganized the Funds into DMUAX, it would deliver a meaningful and immediate cost savings to shareholders in each fund."
• "We intend to nominate new directors at the Funds' upcoming general meeting so that shareholders can finally regain their voice."
• "We believe the conversion into DMUAX would be the easiest path forward. Not only would it be in the best interest of all parties including shareholders and BNY Mellon but it would also enable unnecessary legal and administrative expenses to be avoided."
• "Pursuing a conversion of each fund is a prudent fiduciary step to maximize value for all investors."

Industry Context

This filing highlights a common strategy in activist investing within the closed-end fund (CEF) space, where investors target funds trading at significant discounts to their Net Asset Value (NAV) and advocate for changes such as open-ending the fund or merging it into a lower-cost vehicle. The persistent discounts and higher expense ratios are typical triggers for such activism, aiming to unlock shareholder value by aligning the fund's market price closer to its NAV and reducing operational costs.

Comparison to Industry Standards

• The BNY Mellon Municipal Bond Infrastructure Fund (DMB), BNY Mellon Strategic Municipal Bond Fund (DSM), and BNY Mellon Strategic Municipals (LEO) trade at an average discount of approximately -10% to NAV over the past year, which is considered steep and indicative of shareholder dissatisfaction compared to industry benchmarks.
• The expense ratios for these funds, ranging from 0.97% to 1.68%, are materially higher than BNY Mellon's own open-ended AMT-Free Municipal Bond Fund (DMUAX), which charges 0.70%, demonstrating a significant cost disparity.
• The proposed merger into DMUAX is benchmarked against the successful reorganization of DMF into DMUAX earlier this year, which previously resulted in cost reductions and discount compression, setting a precedent for potential value creation within the BNY Mellon fund family.

Management Changes

Corporate Governance

Stakeholder Impact

• **Shareholders**: Potential for significant value enhancement through discount compression and annual cost savings (nearly 1% for DMB shareholders) if the proposed merger occurs. Increased voice through potential new trustee representation.
• **BNY Mellon (as investment adviser)**: Faces pressure from an activist investor, potentially leading to reduced management fees on the affected funds if they merge into a lower-cost structure, but also potential for increased assets under management in DMUAX.
• **Board of Trustees**: Faces pressure to address shareholder concerns and consider strategic alternatives, including a merger, to fulfill fiduciary duties.

Next Steps

• Saba Capital intends to nominate trustee candidates at the Funds' 2026 annual meeting of shareholders.
• Saba Capital encourages the Issuer's board of trustees to proactively consider a value-enhancing merger of the Funds into BNY Mellon's AMT-Free Municipal Bond Fund (DMUAX).
• The Issuer's board will need to respond to Saba Capital's letter and proposals, potentially initiating discussions regarding the proposed merger or board nominations.

Key Dates

Recommendation

Saba Capital, a prominent activist investor, has taken a significant stake and is actively pushing for strategic changes, including a merger into a lower-cost, open-ended fund. Their actions, backed by a successful precedent (DMF into DMUAX), aim to unlock shareholder value by addressing persistent NAV discounts and high expense ratios. The recent share purchases by Saba Capital further indicate their conviction. If Saba's efforts succeed, the stock price is highly likely to appreciate as the discount to NAV narrows and cost savings are realized, making it a compelling 'buy' for investors seeking to capitalize on activist-driven value creation.

Keywords

Saba Capital, BNY Mellon, Municipal Bond Fund, Activist Investor, Schedule 13D, Closed-End Fund, NAV Discount, Expense Ratio, Corporate Governance, Merger, Trustee Nomination, Shareholder Activism, DMB, DSM, LEO, DMUAX