SCHEDULE: PIMCO NY Muni Fund II Completes Reorganization

PIMCO New York Municipal Income Fund II has completed a reorganization, absorbing two other PIMCO municipal income funds and exchanging preferred shares.

Summary

• PIMCO New York Municipal Income Fund II (PNI) completed a reorganization on August 1, 2025, integrating PIMCO New York Municipal Income Fund (PNF) and PIMCO New York Municipal Income Fund III (PYN).
• As part of the reorganization, Banc of America Preferred Funding Corporation (BAPFC) exchanged its 410 Remarketable Variable Rate MuniFund Term Preferred (RVMTP) Shares of PNF and 260 RVMTP Shares of PYN for an equal number of RVMTP Shares of PNI.
• Following this exchange, BAPFC now beneficially owns a total of 1,170 RVMTP Shares of PNI, representing 88.7% of the class.
• The RVMTP Merger Shares acquired in the reorganization (670 shares) will have voting and consent rights subject to a Voting Trust, consistent with previously held shares.
• The RVMTP Shares are designed to satisfy Rule 144A(d)(3) eligibility requirements and are not listed on any national securities exchange.

Sentiment

Score: 6

Explanation: The filing describes a completed corporate reorganization and share exchange, which is a neutral to slightly positive event as it indicates successful execution of a strategic initiative. There are no immediate negative financial implications disclosed, and the fund's investment policies and credit rating for the preferred shares are strong.

Positives

• The successful completion of the reorganization streamlines the fund structure by consolidating PNF and PYN into PNI.
• The RVMTP Shares, including those acquired in the reorganization, are rated AA by Fitch, indicating high credit quality.
• The fund maintains a policy to invest at least 80% of its total assets in investment-grade securities and 90% in municipal securities exempt from regular federal income tax, supporting a stable income profile.

Negatives

• The fund is subject to additional fees if it fails to comply with reporting requirements or registration rights obligations, potentially increasing operating expenses.
• The fund's investment policies include limits on non-investment grade securities (up to 20% of total assets) and municipal loan investments (up to 10% of total assets), which could introduce some level of credit risk.

Risks

• Failure to comply with reporting requirements (Sections 7.1(n) and 7.1(o)) or a Registration Rights Failure could result in additional fees being levied against the fund.
• Non-compliance with Rating Agency Guidelines could impact the fund's credit ratings.
• Failure to maintain the Effective Leverage Ratio and 1940 Act Asset Coverage as required by the Statement could trigger certain remedies or events.
• The fund is subject to general civil proceedings and regulatory actions, some of which have resulted in findings of violations of federal or state securities laws, as disclosed in BofA Securities Form BD.
• Investment policies allow for up to 5% of total assets in distressed or defaulted obligations, and up to 2% in assets acquired through workout arrangements, which carry higher risk.

Future Outlook

The filing details the completion of a corporate reorganization aimed at consolidating PIMCO New York Municipal Income Fund and PIMCO New York Municipal Income Fund III into PIMCO New York Municipal Income Fund II. This action is a structural change, and the fund expects to continue operating as a regulated investment company, maintaining its investment policies and compliance with SEC regulations, including those related to asset coverage and leverage ratios for its preferred shares.

Management Comments

• Andres Ortiz, Authorized Signatory for Bank of America Corp and Banc of America Preferred Funding Corp, certified the information set forth in the statement as true, complete, and correct to the best of his knowledge and belief.
• Joshua D. Ratner, President of PIMCO New York Municipal Income Fund II, PIMCO New York Municipal Income Fund, and PIMCO New York Municipal Income Fund III, signed the RVMTP Exchange Agreement on behalf of the funds.

Industry Context

This reorganization reflects a trend in the asset management industry towards fund consolidation, often driven by efforts to achieve economies of scale, reduce operational costs, and potentially enhance liquidity or market presence for the surviving fund. For municipal bond funds, such consolidations can optimize portfolio management and administrative efficiencies, especially in a competitive market for tax-exempt income. The continued high beneficial ownership by a major financial institution like Bank of America (through BAPFC) in the preferred shares suggests ongoing institutional interest and support for the fund's structure and investment strategy.

Comparison to Industry Standards

• The fund's policy to invest at least 80% of its total assets in investment-grade securities aligns with common practices for conservative municipal bond funds aiming to provide stable income and preserve capital.
• The 90% allocation to municipal securities that pay federally tax-exempt interest is a standard for 'New York Municipal Income Funds' and is consistent with their stated investment objectives to provide tax-advantaged income to New York residents.
• The AA rating from Fitch for the RVMTP Shares indicates a very strong capacity to meet financial commitments, comparable to high-quality preferred securities in the closed-end fund space.
• The beneficial ownership of 88.7% of the RVMTP shares by Banc of America Preferred Funding Corp is a significant concentration, which is typical for institutional investors in certain tranches of preferred shares, providing a stable, large holder base for these specific securities.

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, some resulting in findings of violations of federal or state securities laws, as reported in BofA Securities Form BD.

Related Party Transactions

• The reorganization involved an exchange of RVMTP Shares between PIMCO New York Municipal Income Fund II (PNI) and Banc of America Preferred Funding Corporation (BAPFC), a subsidiary of Bank of America Corporation. BAPFC was also the holder of RVMTP shares in the acquired PNF and PYN funds, making this a transaction between related entities.

Stakeholder Impact

• **Preferred Shareholders (BAPFC):** The reorganization consolidates their preferred shareholdings into a single fund (PNI), potentially simplifying management and oversight. Their rights and preferences are maintained and clarified through the amended agreements.
• **Common Shareholders (PNI):** The reorganization may lead to administrative and operational efficiencies for the combined fund, potentially benefiting common shareholders over the long term, though no direct financial impact is detailed in this filing.
• **Management:** The reorganization streamlines the fund structure, potentially simplifying management responsibilities for the PIMCO team overseeing these municipal income funds.

Next Steps

• The Acquiring Fund will continue to provide regular portfolio holdings reports and financial information to the Investor.
• The Acquiring Fund is obligated to maintain its registration as a closed-end management investment company under the 1940 Act.
• The Acquiring Fund will continue to comply with its investment policies, including maintaining specific percentages of investment-grade and tax-exempt municipal securities.
• The Acquiring Fund will use commercially reasonable best efforts to comply with reasonable due diligence requests from the Investor for proposed sales of RVMTP Shares.

Key Dates

Recommendation

This filing primarily details a corporate reorganization and share exchange for preferred shares, not a fundamental change in the underlying investment strategy or financial performance that would warrant a strong buy or sell recommendation. The consolidation of funds is a structural event, and the terms for the preferred shares appear consistent with prior agreements. For a seasoned investor, this confirms the planned corporate action and the continued stability of the preferred share structure, making a 'hold' recommendation appropriate unless there are broader market or fund-specific factors outside this filing that suggest otherwise.

Keywords

PIMCO, Municipal Income Fund, Reorganization, RVMTP Shares, Preferred Stock, SEC Filing, Schedule 13D, Fund Consolidation, Fixed Income, Investment Grade, Tax-Exempt Bonds