DEFA14A: Mainstay CBRE Global Infrastructure Megatrends Term Fund Faces Proxy Fight with Saba Capital

Mainstay CBRE Global Infrastructure Megatrends Term Fund (MEGI) is urging shareholders to vote for its nominees in the face of a challenge from activist hedge fund Saba Capital, which is seeking to elect its own representative to the Board.

Summary

• NYL Investments and Saba Capital will be distributing proxy materials to shareholders for the upcoming MEGI shareholder meeting in September.
• The meeting will involve the election of Trustees to MEGI's board.
• MEGI's Board consists of 6 independent Trustees and 1 interested Trustee.
• This year, Alan Latshaw and Karen Hammond are up for re-election.
• Saba Capital, holding approximately 11% of outstanding shares, is nominating Paul Kazarian, an employee of Saba.
• The Board opposes Saba's nominee, stating it's not in the best interest of the Fund or its shareholders.
• The Board believes Saba's nominee represents Saba's interests and lacks fiduciary duty to the Fund's shareholders.
• MEGI has delivered consistent distributions since October 2021 and increased monthly distributions by 15% over the last year, compared to a 2% increase for peer funds.
• MEGI's discount has narrowed approximately 6.5% year-to-date as of 7/26/24 and is trading in-line with the peer group average.
• Proxy statements will be sent to MEGI shareholders around August 1st.
• Shareholders are encouraged to vote FOR the Board's nominees using the WHITE proxy card by September 27, 2024.
• Shareholders are advised not to return any proxy card received from Saba.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While highlighting positive performance metrics like distribution increases and discount narrowing, it also acknowledges the challenges posed by market volatility and the proxy fight with Saba Capital. The Board's strong opposition to Saba's nominee adds a layer of concern.

Positives

• MEGI has delivered consistent and attractive distributions since its inception in October 2021.
• The fund offers distribution rates higher than most of its peers, increasing the monthly distribution by 15% over the last year.
• MEGI's discount has narrowed approximately 6.5% year-to-date as of 7/26/24 and is trading in-line with the peer group average.
• The Funds Board and Management have taken steps to keep expenses low.

Negatives

• MEGI is facing a proxy fight from an activist hedge fund, Saba Capital.
• Saba Capital believes changes are needed and is attempting to elect its own nominee to the Board.
• The unprecedented interest rate tightening cycle that commenced shortly after the MEGIs launch resulted in significant market volatility and the expansion of NAV discounts within the peer group.

Risks

• Saba Capital's actions could lead to adverse consequences for long-term investors.
• The Board believes Saba's nominee would prioritize Saba's interests over those of all shareholders.
• Market volatility and NAV discounts could persist.

Future Outlook

The Board and Fund management are committed to continued thoughtful actions designed to enhance long-term shareholder value and improving the relationship between the Funds Net Asset Value (NAV) and its market price.

Management Comments

• The Board is unanimously OPPOSED to the nomination of Sabas Nominee as it does not believe the nomination is in the best interest of the Fund or its shareholders.
• NYLIM believes that the proposed change to the Funds independent trustees is not warranted for several reasons.

Industry Context

Activist investors like Saba Capital often target closed-end funds with the goal of narrowing the discount between the market price and the net asset value. This can involve pressuring the fund to take actions such as tender offers, liquidations, or changes in investment strategy.

Comparison to Industry Standards

• The document mentions that MEGI's distribution rates are higher than most of its peers.
• Peer funds have experienced a modest 2% increase in distributions in the last year, while MEGI increased its monthly distribution by 15%.
• MEGI's discount is trading in-line with the peer group average.

Stakeholder Impact

• Shareholders are directly impacted by the proxy fight and the outcome of the vote.
• The Board's actions aim to enhance long-term shareholder value.
• Saba Capital's involvement could lead to changes in the fund's strategy and performance.

Next Steps

• Shareholders will receive proxy statements around August 1st.
• Shareholders are encouraged to vote using the WHITE proxy card by September 27, 2024.

Key Dates

Keywords

proxy fight, Saba Capital, MEGI, Mainstay CBRE Global Infrastructure Megatrends Term Fund, Board of Trustees, shareholder meeting, proxy statement, distributions, NAV discount, corporate governance