SCHEDULE 13D/A: Bank of America Entities Waive Liquidity Requirement for Federated Hermes Municipal Preferred Shares

Bank of America Corporation and Banc of America Preferred Funding Corporation have agreed to temporarily waive a key liquidity requirement for Federated Hermes Premier Municipal Income Fund's Variable Rate Municipal Term Preferred Shares.

Summary

• Bank of America Corporation (BAC) and Banc of America Preferred Funding Corporation (BAPFC), collectively the "Reporting Persons," filed an Amendment No. 7 to their Schedule 13D.
• This amendment relates to their beneficial ownership of 1,347.00 Variable Rate Municipal Term Preferred Shares (VMTP Shares) of Federated Hermes Premier Municipal Income Fund, representing 100% of the class.
• The core of the amendment is an "Acknowledgement and Consent of Waiver" dated February 3, 2025, between the Fund and BAPFC, as the sole Designated Owner of the 2019 VMTP Shares.
• The waiver temporarily relieves Federated Hermes Premier Municipal Income Fund from its obligation to comply with the "Liquidity Requirement" for its 2019 VMTP Shares.
• The Liquidity Requirement mandates the Fund to segregate Liquidity Account Investments with a Market Value equal to at least 110% of the Term Redemption Amount.
• The waiver period begins on February 16, 2025, and continues through March 16, 2025.
• The Liquidity Requirement will become applicable again on March 17, 2025, at the level determined as if the initial date had occurred on February 16, 2025.
• The Fund has agreed to cover BAPFC's reasonable costs and expenses, including outside counsel fees, related to this waiver.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the necessity of a waiver for a liquidity requirement, which suggests potential underlying financial stress for the issuer (Federated Hermes Premier Municipal Income Fund). While the reporting entities (Bank of America) are merely consenting to this waiver as the sole holder, the event itself points to a challenge for the fund in which they are invested.

Positives

• For Banc of America Preferred Funding Corporation, the waiver allows for flexibility in managing its investment in the Federated Hermes Premier Municipal Income Fund's preferred shares.
• The agreement ensures continued cooperation between BAPFC and Federated Hermes Premier Municipal Income Fund regarding the VMTP Shares.

Negatives

• The waiver indicates that Federated Hermes Premier Municipal Income Fund may be facing challenges in meeting its "Liquidity Requirement" of maintaining 110% of the Term Redemption Amount in segregated investments.
• The Fund is obligated to pay BAPFC's costs and expenses related to the waiver, which represents an additional cost for the Fund.

Risks

• Liquidity Risk for Issuer: The waiver suggests that Federated Hermes Premier Municipal Income Fund might be experiencing liquidity challenges or difficulties in maintaining the required 110% of the Term Redemption Amount in its Liquidity Account.
• Compliance Risk for Issuer: While waived for a period, the underlying obligation remains, and the Fund must ensure compliance by March 17, 2025, to avoid further issues.
• Reputational Risk for Issuer: A waiver of a liquidity requirement could signal financial stress to investors, potentially impacting the Fund's reputation.

Future Outlook

The waiver of the Liquidity Requirement for Federated Hermes Premier Municipal Income Fund's 2019 VMTP Shares is temporary, effective until March 16, 2025. The Fund is expected to comply with the Liquidity Requirement again starting March 17, 2025, at the level determined as if the initial date had occurred on February 16, 2025.

Industry Context

This filing reflects a specific agreement between a major financial institution (Bank of America entities) and an investment fund (Federated Hermes) regarding a preferred share holding. While not indicative of broad industry trends, such waivers can occur in the closed-end fund or preferred share market when an issuer faces temporary challenges in meeting specific covenants, requiring negotiation with significant holders.

Corporate Governance

Legal Proceedings

• Bank of America Corporation and certain affiliates, including BofA Securities, Inc. and Bank of America, N.A., have been involved in civil proceedings and regulatory actions concerning their business conduct, with some resulting in findings of violations of federal or state securities laws. These are reported and summarized in BofA Securities Form BD and incorporated by reference.

Stakeholder Impact

• Shareholders (of Federated Hermes Premier Municipal Income Fund): The waiver of a liquidity requirement could be a negative signal, potentially raising concerns about the Fund's financial health and ability to meet its obligations.
• Shareholders (of Bank of America Corporation): The impact is likely minimal given the size of Bank of America and the specific nature of the preferred share holding.
• Creditors (of Federated Hermes Premier Municipal Income Fund): The waiver might indicate a heightened risk profile for the Fund, potentially affecting its creditworthiness.

Next Steps

• Federated Hermes Premier Municipal Income Fund is expected to resume compliance with the Liquidity Requirement for its 2019 VMTP Shares starting March 17, 2025.

Key Dates

Keywords

SEC filing, Schedule 13D/A, Bank of America Corporation, Banc of America Preferred Funding Corporation, Federated Hermes Premier Municipal Income Fund, Variable Rate Municipal Term Preferred Shares, VMTP Shares, Liquidity Requirement, Waiver, Preferred Stock, Investment Management, Financial Disclosure, Corporate Governance