Current Price – $11.61
Offer Price – $12.36
Upside – 6.5% or $80 for odd lot holders
Expiration Date – 13th of April, 2018
DSU is trading at 8% discount to NAV and is offering to purchase up to 10% of shares at 98% of NAV. This tender will most likely be oversubscribed, thus this trade is probably only for odd-lots.
Fund’s NAV has stayed in a narrow range of $12.6-$12.7 per share and is unlikely to deviate significantly before tender expiration as majority of portfolio is corporate loans and bonds. Thus cash-out price of $12.36/share +-$0.1 is quite certain in this case.
Tender document says that “the Fund may accept all Shares tendered by stockholders who own, beneficially or of record, an aggregate of not more than 99 Shares and who tender all of their Shares, before pro rating Shares tendered by other stockholders”. Tender offers carried out by BlackRock Enhanced Government Fund in 2016 and 2017 had the same ‘may’ phrase, but odd-lots were accepted without proration in both cases. So I am hoping the same will be applied for this BlackRock fund as well.
As there is no mention of guaranteed delivery, shares might need to settle before the tender offer expiration (17th of April). Therefore position needs to be established 3 days before the tender expiration. Brokers might also have earlier deadlines for submitting shares.