UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 12, 2016
Pacholder High Yield Fund, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
| 811-05639 | 31-1251983 | |
| (Commission File Number) | (IRS Employer Identification No.) |
| 270 Park Avenue, New York, NY | 10017 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(877) 217-9502
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| x | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
On February 12, 2016, Pacholder High Yield Fund, Inc. (the “Fund”) entered into a Tender Offer Support Agreement (the “RiverNorth Tender Offer Support Agreement”) with J.P. Morgan Investment Management Inc. (the “Adviser”), RiverNorth Capital Management, LLC (“RNCM”), RiverNorth Capital Partners, L.P. (“RNCP”) and RiverNorth Institutional Partners, L.P. (“RNIP” and, together with RNCM and RNCP, the “RiverNorth Parties”). Pursuant to the RiverNorth Tender Offer Support Agreement, the Fund has agreed, among other things, to commence a tender offer (the “Tender Offer”) not later than March 11, 2016, to purchase up to 100% of its outstanding shares of Auction Rate Cumulative Preferred Stock, Series W (the “Preferred Shares”) at a price equal to 95.5% of the liquidation preference of $25,000 per share (or $23,875 per share), plus unpaid accrued dividends, subject to agreed upon conditions. The conditions to the Tender Offer shall include, among others, that at least 80% of the outstanding Preferred Shares are tendered in the Tender Offer (the “Minimum Condition”) and that the Fund shall have entered into a credit facility and have funds available thereunder sufficient to fund the purchase of the Preferred Shares in the Tender Offer (the “Financing Condition”). The RiverNorth Parties have agreed, among other things, to tender 100% of their Preferred Shares in the Tender Offer.
Also, on February 12, 2016, the Fund and the Adviser entered into a Tender Offer Support Agreement (the “Morgan Stanley Tender Offer Support Agreement” and together with the RiverNorth Tender Offer Support Agreement, the “Tender Offer Support Agreements”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) pursuant to which the Fund has agreed, among other things, to commence the Tender Offer not later than March 11, 2016 and Morgan Stanley has agreed, among other things, to tender 100% of its Preferred Shares in the Tender Offer.
The Preferred Shares covered by the Tender Offer Support Agreements are sufficient to insure that the Minimum Condition is satisfied.
The foregoing description of the RiverNorth Tender Offer Support Agreement and the Morgan Stanley Tender Offer Support Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibits 10.1, 10.2 and 99.1 hereto, which are incorporated herein by reference.
| Item 8.01 | Other Events |
On February 12, 2016, the Fund issued a press release announcing that its Board of Directors has approved the commencement of the Tender Offer to purchase up to 100% of its outstanding Preferred Shares at a price equal to 95.5% of the liquidation preference of $25,000 per share (or $23,875 per share), plus unpaid accrued dividends, subject to certain conditions including the Minimum Condition and the Financing Condition. The Fund expects to commence the proposed tender offer no later than March 11, 2016. A copy of the press release announcing the Board of Director approval of the Tender Offer is filed as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.
Additional Information
This current report on Form 8-K is neither an offer to purchase nor a solicitation of an offer to sell securities. The Tender Offer described in this report and the accompanying exhibit has not yet commenced. The solicitation of offers to buy the Preferred Shares will only be made pursuant to an Offer to Purchase and other related documents that the Fund will send to holders of the Preferred Shares (the “Preferred Shareholders”) once the tender offer has commenced. Preferred Shareholders are urged to read these materials, as well as any other relevant documents filed with the Securities and Exchange Commission (the “SEC”), carefully and in their entirety because they will contain important information, including the terms and conditions of the tender offer. Those materials will be distributed by the Fund to the Preferred Shareholders at no expense to them.
Upon commencement of the Tender Offer, the Fund will file the Offer to Purchase and other related documents with the SEC, and, when available, investors may obtain them free of charge from the SEC at its website (www.sec.gov) or free of charge from the Fund as described in Exhibit 99.1.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits:
| Exhibit |
Description | |
| 10.1 | RiverNorth Tender Offer Support Agreement dated February 12, 2016 | |
| 10.2 | Morgan Stanley Tender Offer Support Agreement dated February 12, 2016 | |
| 99.1 | Press Release dated February 12, 2016 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Pacholder High Yield Fund, Inc. | ||
| By: | /s/ Laura Del Prato | |
| Name: | Laura Del Prato | |
| Title: |
Treasurer and Principal Financial Officer | |
Date: February 12, 2016
Exhibit Index
| Exhibit |
Description | |
| 10.1 | RiverNorth Tender Offer Support Agreement dated February 12, 2016 | |
| 10.2 | Morgan Stanley Tender Offer Support Agreement dated February 12, 2016 | |
| 99.1 | Press Release dated February 12, 2016 | |
Exhibit 10.1
TENDER OFFER SUPPORT AGREEMENT
This Agreement (“Agreement”) is made and entered into as of February 12, 2016, by and among Pacholder High Yield Fund, Inc. (the “Fund”), J.P. Morgan Investment Management Inc. (“JPMIM” and, together with the Fund, the “Fund Parties”) and RiverNorth Capital Management, LLC (“RNCM”), RiverNorth Capital Partners, L.P. (“RNCP”) and RiverNorth Institutional Partners, L.P. (“RNIP” and, together with RNCM, RNCP and RNIP the “RiverNorth Parties”).
WHEREAS, the RiverNorth Parties and their affiliates (together, “RiverNorth”) are substantial holders of auction rate preferred shares issued by the Fund (the “ARPS”), a closed-end investment company registered under the Investment Company Act of 1940 for which JPMIM currently serves as investment adviser;
WHEREAS, the RiverNorth Parties have engaged in discussions with the Fund Parties regarding the RiverNorth Parties’ proposal that the Fund pursue liquidity alternatives for the outstanding ARPS of the Fund, including a proposal that the Fund conduct an issuer tender offer for the ARPS, and in that connection entered into a confidentiality agreement dated May 27, 2015, as amended from time to time (the “Confidentiality Agreement”), regarding confidentiality obligations with respect to the discussions (together, the “Discussions”);
WHEREAS, the parties wish to resolve various matters associated with the Discussions and RiverNorth’s holdings of the ARPS.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Tender Offer.
Subject to satisfaction of Section 2(a) below, the Fund Parties agree to commence, not later than March 11, 2016, a tender offer by the Fund for 100% of its issued and outstanding ARPS at a price equal to 95.5% of the $25,000 per share liquidation preference of the ARPS (i.e., a tender offer of $23,875 per ARPS share), scheduled to expire as of the close of the New York Stock Exchange on the 20th business day following commencement (such date, as it may be extended in accordance with the terms of the Tender Offer, the “Expiration Date”), subject only to substantially the same conditions as are set forth in Appendix A hereto (the “Tender Offer”). The Fund hereby agrees that if, as of the Expiration Date of the Tender Offer, all of such conditions are satisfied or in its sole discretion, waived, it shall accept for payment all ARPS properly tendered pursuant to the Tender Offer.
2. Agreements and Obligations of the RiverNorth Parties.
The RiverNorth Parties hereby agree and undertake that:
(a) If the Tender Offer is conducted by the Fund, RiverNorth shall tender one-hundred percent (100%) of its holdings in ARPS of the Fund, such that RiverNorth would have no holdings in the ARPS following completion of the Tender Offer.
(b) The RiverNorth Parties shall, for a period of three (3) years from and after the date that the Tender Offer is completed, (i) refrain from directly or indirectly purchasing any ARPS of the Fund, (ii) refrain from directly or indirectly making or supporting any shareholder proposals concerning the Fund including, without limitation, any nomination of a candidate for Director of the Board of Directors of the Fund (the “Board”), (iii) vote in accordance with the Board’s and management’s recommendations on any matters affecting the Fund to the extent deemed consistent with the RiverNorth Parties’ contractual obligations to their clients and not inconsistent with their fiduciary duties, (iv) refrain from directly or indirectly soliciting or encouraging others to vote against the Board’s and management’s recommendations on any matters affecting the Fund; and (v) refrain from directly or indirectly
proposing, or making any filing with respect to, any form of business combination, restructuring, recapitalization, dissolution or similar transaction involving the Fund, including, without limitation, a merger, tender or exchange offer, open-ending, share repurchase or liquidation of the Fund’s assets.
(c) The RiverNorth Parties shall, for a period of three (3) years from and after the date that the Tender Offer is completed, (i) refrain from directly or indirectly making or supporting any shareholder proposals concerning any other existing or future registered investment company advised, sub-advised, distributed or sponsored by JPMIM or their affiliates (“Other JPMIM Funds”) including, without limitation, any nomination of a candidate for trustee or director of the Other JPMIM Funds, (ii) vote in accordance with the applicable board of trustees/directors’ (or similar body, a “board”) and management’s recommendations on any matters affecting Other JPMIM Funds to the extent deemed consistent with the RiverNorth Parties’ contractual obligations to their clients and not inconsistent with their fiduciary duties, (iii) refrain from directly or indirectly soliciting or encouraging others to vote against the applicable board’s and management’s recommendations on any matters affecting Other JPMIM Funds; and (iv) refrain from directly or indirectly proposing, or making any filing with respect to, any form of business combination, restructuring, recapitalization, dissolution or similar transaction involving Other JPMIM Funds, including, without limitation, a merger, tender or exchange offer, open-ending, share repurchase or liquidation of the assets of Other JPMIM Funds.
3. Release of Any Claims; Covenants Not to Sue.
(a) Subject to and upon completion of the Tender Offer, each of the RiverNorth Parties, on behalf of itself, its heirs, beneficiaries, administrators, personal representatives, successors, assigns, parents, subsidiaries, shareholders, affiliates, and predecessors, as applicable, in exchange for the agreements and other consideration in this Agreement, (i) does hereby compromise, settle, and absolutely, unconditionally, and fully release and forever discharge each of the Fund Parties and their current and former respective successors, subsidiaries, affiliates, employees, officers, directors, trustees, managers, investors and shareholders, and each of their respective attorneys, administrators, personal representatives, insurers and assigns (together, the “Released Fund Parties”) of and from any and all claims, demands, debts, liens, obligations, fees and expenses, harm, injuries, liabilities, cause or causes of action, whether known or unknown, claimed or alleged, asserted or unasserted, either at law or in equity, whether statutory, in contract or in tort, of any kind or character which it has, or owns, or may now or in the future have or own for any claims arising out of or relating in any way to the Discussions, the Tender Offer or RiverNorth’s acquisition of, transactions in, ownership of or holdings in the ARPS and (ii) acknowledges and agrees that it will not now or in the future bring any claim, action, lawsuit, arbitration proceeding or other form of action against any of the Released Fund Parties, directly or indirectly, arising out of or in any way connected with any claim or potential claim released under this Agreement as referenced in sub-paragraph 3(a)(i) above, and that this Agreement is a bar to any such claim, action, lawsuit, proceeding or other form of action.
(b) Subject to and upon completion of the Tender Offer, each of the Fund Parties, on behalf of itself, its heirs, beneficiaries, administrators, personal representatives, successors, assigns, parents, subsidiaries, shareholders, affiliates, and predecessors, as applicable, in exchange for the agreements and other consideration in this Agreement, (i) does hereby compromise, settle, and absolutely, unconditionally, and fully release and forever discharge each of the RiverNorth Parties and their current and former respective successors, subsidiaries, affiliates, employees, officers, directors, trustees, managers, investors and shareholders, and each of their respective attorneys, administrators, personal representatives, insurers and assigns (together, the “Released RiverNorth Parties”) of and from any and all claims, demands, debts, liens, obligations, fees and expenses, harm, injuries, liabilities, cause or causes of action, whether known or unknown, claimed or alleged, asserted or unasserted, either at law or in equity, whether statutory, in contract or in tort, of any kind or character which it has, or owns, or may now or in the future have or own for any claims arising out of or relating in any way to the Discussions, the Tender Offer or RiverNorth’s acquisition of, transactions in, ownership of or holdings in the ARPS and (ii) acknowledges and agrees that it will not now or in the future bring any claim, action, lawsuit, arbitration proceeding or other form of action against any of the Released RiverNorth Parties, directly or indirectly, arising out of or in any way connected with any claim or potential claim released under this Agreement as referenced in sub-paragraph 3(b)(i) above, and that this Agreement is a bar to any such claim, action, lawsuit, proceeding or other form of action.
(c) The RiverNorth Parties and the Fund Parties acknowledge and agree that the releases and covenants provided in this Section 3 are in no way an admission or acknowledgment of any liabilities, claims or causes of action that one party may have against the other.
(d) Notwithstanding anything to the contrary contained in this Agreement, the provisions of Section 3(a) and Section 3(b) shall not be deemed to preclude any claim by any party hereto alleging a breach of the terms of this Agreement.
4. No Disparagement.
For a period of three (3) years from and after the date of this Agreement, the RiverNorth Parties, on the one hand, and the Fund Parties, on the other hand, shall refrain from directly or indirectly disparaging, impugning, or taking any action reasonably likely to damage the reputation of the other party or its employees or affiliates or the current and former Directors or officers of the Fund with respect to the subject matter of the Discussions, the Tender Offer or RiverNorth’s holdings in the ARPS, including relating to prior discussions, actions and communications regarding leverage alternatives, prior litigation and related outcomes (including involving Other JPMIM Funds), the subject matter of proxy contests (including involving Other JPMIM Funds), and Fund governance, management, performance, compliance and related topics. The foregoing shall not apply to any compelled testimony or production of information, either by legal process, subpoena, or as part of a response to a request for information from any governmental authority with jurisdiction over the party from whom information is sought.
5. Injunctive Relief.
Each party acknowledges that a breach of its obligations under this Agreement may result in irreparable harm to the other party for which monetary damages will not be sufficient. Each party hereto agrees that, in the event of a breach or threatened breach by the other party of its obligations under this Agreement, the non-breaching party shall be entitled, in addition to its other rights and remedies hereunder or at law, to injunctive or other equitable relief, and such further relief as may be proper from a court of competent jurisdiction, including specific performance of the obligations set forth in Section 2 of this Agreement.
6. Confidentiality.
The RiverNorth Parties and the Fund Parties hereby agree to and do hereby extend the term of the Confidentiality Agreement and their respective obligations thereunder, until the first to occur of (i) the commencement of the Tender Offer; (ii) the public disclosure of this Agreement or (iii) two years from the date hereof, in the event the Tender Offer is not commenced provided that the Fund Parties may disclose the subject matter of the Tender Offer to third parties, including to other holders of the ARPS and to service providers and agents who may be engaged to assist in conducting the Tender Offer, before the Tender Offer is publicly announced. For the avoidance of doubt, the RiverNorth Parties acknowledge that the Fund will be required to file a copy of this Agreement with its Form TO filings in connection with the Tender Offer.
7. Term.
This Agreement shall terminate on the earlier of (i) March 11, 2016, if the Fund has not on or before that date commenced the Tender Offer and (ii) the close of the New York Stock Exchange on the business day next following the Expiration Date, if the Funds have not accepted validly tendered ARPS for purchase pursuant to the Tender Offer by such time. In the case of termination of this Agreement pursuant to Section 7(i) and Section 7(ii), all provisions of this Agreement shall terminate and have no further force or effect upon such termination, except that the confidentiality obligations of the parties under Section 6 hereof and the Confidentiality Agreement shall survive the termination of this Agreement for the period set forth in Section 6 hereof. In the case of the completion of the Tender Offer the obligations of the parties under Sections 2(b), 2(c) 3, 4, 5, 7 and 9 hereof shall survive the termination of this Agreement.
8. Financing Efforts.
The Fund hereby agrees to use commercially reasonable efforts to enter into the credit facility necessary to satisfy the Financing Condition (as defined in the Offer to Purchase accompanying the Tender Offer), which is a material condition to the Tender Offer (the “Credit Facility”) as soon as practicable following the date hereof. The Credit Facility shall provide the Fund with financing sufficient for the payment in full of all consideration payable in the event that all of the holders of the ARPS tender their ARPS and the payment of all costs and fees to be borne by the Fund in connection with the Tender Offer.
9. Miscellaneous.
(a) Notices. Any notices or other communications required or permitted hereunder will be deemed to have been properly given and delivered if in writing by such party or its legal representative and delivered personally or sent by e-mail or other electronic communication, or by a nationally recognized overnight courier service guaranteeing overnight delivery, addressed as follows:
| If to a RiverNorth Party: |
RiverNorth Capital Management, LLC | |
| 325 North LaSalle Street, Suite 645 | ||
| Chicago, Illinois 60654 | ||
| Attn: | ||
| E-mail: | ||
| If to JPMIM: |
J.P. Morgan Investment Management Inc. | |
| 270 Park Avenue | ||
| New York, New York 10017 | ||
| Attn: | ||
| E-mail: | ||
| If to the Fund: |
Pacholder High Yield Fund, Inc. | |
| 270 Park Avenue | ||
| New York, New York 10017 | ||
| Attn: | ||
| E-mail: | ||
(b) No Assignment. No Party shall assign this Agreement or its rights hereunder without the express written consent of the other parties.
(c) Agreement Separable. If any provision hereof is for any reason unenforceable or inapplicable, the other provisions hereof will remain in full force and effect in the same manner as if such unenforceable or inapplicable provision had never been contained herein.
(d) Counterparts. This Agreement may be executed in any number of counterparts, each of which will, for all purposes, be deemed to be an original. Facsimile or electronic signatures shall have the same force and effect as executed originals.
(e) Governing Law. This Agreement is governed by the laws of the State of New York, without regard to the principles of conflicts of laws or choice of laws of any state or commonwealth. Each party submits to the exclusive jurisdiction of, and acknowledges the propriety of venue in the United States District Court for the Southern District of New York sitting in New York County, New York, and its appellate courts, as well as any Courts of the State of New York sitting in New York County, New York, and the appellate courts thereof. To the extent not prohibited by applicable law that cannot be waived, the parties hereby waive, and covenant that they will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any action arising in whole or in part under or in connection with this Agreement, whether now existing or hereafter arising, and whether sounding in contract, tort or otherwise. The parties agree that any of them may file a copy of this Section 8(e) with any court as written evidence of the knowing, voluntary and bargained-for agreement between the parties each irrevocably to waive its right to trial by jury in any proceeding whatsoever between them relating to this Agreement, which will instead be tried in a court of competent jurisdiction by a judge sitting without a jury.
(f) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters set forth herein, and there are no other covenants, agreements, promises, terms and provisions, conditions, undertakings or understandings, either oral or written, between them other than those herein set forth. No subsequent alteration, amendment, change, deletion or addition to this Agreement shall be binding upon the parties unless in writing and signed by the parties.
(g) Further Assurances. Each party covenants, on behalf of itself and its successors and assigns, to take all actions and do all things, and to promptly and duly execute, acknowledge and deliver any and all such further instruments and documents necessary or proper to achieve the purposes and objectives of this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above, and each party represents and acknowledges that it possesses the requisite authority to execute this Agreement.
| PACHOLDER HIGH YIELD FUND, INC. | ||||||
| By: | /s/ Laura Del Prato | |||||
| Name: Laura Del Prato | ||||||
| Title: Treasurer and Principal Financial Officer | ||||||
| J.P. MORGAN INVESTMENT MANAGEMENT INC. | ||||||
| By: | /s/ Laura Del Prato | |||||
| Name: Laura Del Prato | ||||||
| Title: Managing Director | ||||||
| RIVERNORTH CAPITAL MANAGEMENT, LLC | ||||||
| By: | /s/ Marc Collins | |||||
| Name: Marc Collins | ||||||
| Title: General Counsel and CCO | ||||||
| RIVERNORTH CAPITAL PARTNERS, L.P. | ||||||
| By: | /s/ Marc Collins | |||||
| Name: Marc Collins | ||||||
| Title: General Counsel and CCO | ||||||
| RIVERNORTH INSTITUTIONAL PARTNERS, L.P. | ||||||
| By: | /s/ Marc Collins | |||||
| Name: Marc Collins | ||||||
| Title: General Counsel and CCO | ||||||
APPENDIX A
TENDER OFFER CONDITIONS:
It is a condition to the Tender Offer that the Fund will not accept tenders or effect repurchases, unless otherwise determined by the Fund’s Board, if: (1) there have been validly tendered and not withdrawn prior to the expiration of the Tender Offer that number of Preferred Shares which represent less than 80% of the Fund’s outstanding Preferred Shares; (2) the Financing Condition (as defined in the Offer to Purchase accompanying the Tender Offer) has not been satisfied or waived; (3) such transactions, if consummated, would (a) result in delisting of the Fund’s common shares from the New York Stock Exchange; (b) impair the Fund’s status as a regulated investment company under the Internal Revenue Code of 1986 (which would make the Fund subject to federal income tax on all of its net income and gains in addition to the taxation of shareholders who receive distributions from the Fund); or (c) result in a liquidation of the Fund or a mandatory redemption due to the failure of the Fund to comply with the applicable maintenance amount or asset coverage requirements in the event any senior securities are issued and outstanding; (4) there shall be instituted or pending before any governmental entity or court any action, proceeding, application or claim, or any judgment, order or injunction sought, or any other action taken by any person or entity, which (a) restrains, prohibits or materially delays the making or consummation of the Tender Offer; (b) challenges the acquisition by the Fund of the ARPS pursuant to the Tender Offer or the Board’s fulfillment of its fiduciary obligations in connection with the Tender Offer; (c) seeks to obtain any material amount of damages in connection with the Tender Offer; or (d) otherwise directly or indirectly materially adversely affects the Tender Offer or the Fund; (5) there is any (a) suspension of or limitation on prices for trading securities generally on the New York Stock Exchange or other national securities exchange(s); (b) declaration of a banking moratorium by Federal or state authorities or any suspension of payment by banks in the United States or New York State; or (c) limitation affecting the Fund or the issuers of its portfolio securities imposed by federal or state authorities on the extension of credit by lending institutions; or (6) the Board determines that effecting any such transaction would constitute a breach of its fiduciary duty owed to the Fund or holders of its Preferred Shares.
Exhibit 10.2
TENDER OFFER SUPPORTAGREEMENT
This Agreement (“Agreement”) is made and entered into as of February 12, 2016, by and among Pacholder High Yield Fund, Inc. (the “Fund”), J.P. Morgan Investment Management Inc. (“JPMIM” and, together with the Fund, the “Fund Parties”) and Morgan Stanley & Co. LLC (“Morgan Stanley”).
WHEREAS, Morgan Stanley is a substantial holder of auction rate preferred shares issued by the Fund (the “ARPS”), a closed-end investment company registered under the Investment Company Act of 1940 for which JPMIM currently serves as investment adviser;
WHEREAS, Morgan Stanley has engaged in discussions with the Fund Parties regarding a proposal that the Fund conduct an issuer tender offer for the ARPS, and in that connection entered into a confidentiality agreement dated September 29, 2015 (the “Confidentiality Agreement”), regarding confidentiality obligations with respect to the discussions (together, the “Discussions”);
WHEREAS, the parties wish to resolve various matters associated with the Discussions and Morgan Stanley’s holdings of the ARPS.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Tender Offer.
Subject to satisfaction of Section 2 below, the Fund Parties agree to commence, not later than March 11, 2016, a tender offer by the Fund for 100% of its issued and outstanding ARPS at a price equal to 95.5% of the $25,000 per share liquidation preference of the ARPS (i.e., a tender offer of $23,875 per ARPS share), scheduled to expire as of the close of the New York Stock Exchange on the 20th business day following commencement (such date, as it may be extended in accordance with the terms of the Tender Offer, the “Expiration Date”), subject to substantially the same conditions as are set forth in Appendix A hereto (the “Tender Offer”). The Fund hereby agrees that if, as of the Expiration Date of the Tender Offer, all of such conditions are satisfied or in its sole discretion, waived, it shall accept for payment all ARPS properly tendered pursuant to the Tender Offer.
2. Agreements and Obligations of Morgan Stanley.
Morgan Stanley hereby agrees and undertakes that:
If the Tender Offer is conducted by the Fund, Morgan Stanley shall tender one-hundred percent (100%) of the ARPS of the Fund held by it for its own account (i.e., 486 ARPS as of the date the Agreement), such that Morgan Stanley would have no holdings of the ARPS for its own account following acceptance by the Fund Parties of the Tender Offer.
3. Confidentiality.
Morgan Stanley and the Fund Parties hereby agree to and do hereby extend the term of the Confidentiality Agreement and their respective obligations thereunder, until the first to occur of (i) the commencement of the Tender Offer; (ii) the public disclosure of this Agreement or (iii) two years from the date hereof, in the event the Tender Offer is not commenced provided that the Fund Parties may disclose the subject matter of the Tender Offer to third parties, including to other holders of the ARPS and to service providers and agents who may be engaged to assist in conducting the Tender Offer, before the Tender Offer is publicly announced. For the avoidance of doubt, Morgan Stanley acknowledges that the Fund will be required to file a copy of this Agreement with its Form TO filings in connection with the Tender Offer.
4. Term.
This Agreement shall terminate on the earlier of (i) March 11, 2016, if the Fund has not on or before that date commenced the Tender Offer and (ii) the close of the New York Stock Exchange on the business day next following the Expiration Date, if the Funds have not accepted validly tendered ARPS for purchase pursuant to the Tender Offer by such time. In the case of termination of this Agreement pursuant to Section 4(i) and Section 4(ii), all provisions of this Agreement shall terminate and have no further force or effect upon such termination, except that the confidentiality obligations of the parties under Section 3 hereof and the Confidentiality Agreement shall survive the termination of this Agreement for the period set forth in Section 3 hereof. In the case of the completion of the Tender Offer the obligations of the parties under Sections 3, 4 and 6 hereof shall survive the termination of this Agreement.
5. Financing Efforts.
The Fund hereby agrees to use commercially reasonable efforts to enter into the credit facility necessary to satisfy the Financing Condition, which is a material condition to the Tender Offer (the “Credit Facility”) as soon as practicable following the date hereof. The Credit Facility shall provide the Fund with financing sufficient for the payment in full of all consideration payable in the event that all of the holders of the ARPS tender their ARPS and the payment of all costs and fees to be borne by the Fund in connection with the Tender Offer.
6. Miscellaneous.
(a) Notices. Any notices or other communications required or permitted hereunder will be deemed to have been properly given and delivered if in writing by such party or its legal representative and delivered personally or sent by e-mail or other electronic communication, or by a nationally recognized overnight courier service guaranteeing overnight delivery, addressed as follows:
| If to Morgan Stanley: |
Morgan Stanley & Co | |
| 1585 Broadway | ||
| New York, NY 10036 | ||
| Attn: | ||
| E-mail: | ||
| If to JPMIM: |
J.P. Morgan Investment Management Inc. | |
| 270 Park Avenue | ||
| New York, New York 10017 | ||
| Attn: | ||
| E-mail: | ||
| If to the Fund: |
Pacholder High Yield Fund, Inc. | |
| 270 Park Avenue | ||
| New York, New York 10017 | ||
| Attn: | ||
| E-mail: | ||
(b) No Assignment. No Party shall assign this Agreement or its rights hereunder without the express written consent of the other parties.
(c) Agreement Separable. If any provision hereof is for any reason unenforceable or inapplicable, the other provisions hereof will remain in full force and effect in the same manner as if such unenforceable or inapplicable provision had never been contained herein.
(d) Counterparts. This Agreement may be executed in any number of counterparts, each of which will, for all purposes, be deemed to be an original. Facsimile or electronic signatures shall have the same force and effect as executed originals.
(e) Governing Law. This Agreement is governed by the laws of the State of New York, without regard to the principles of conflicts of laws or choice of laws of any state or commonwealth. Each party submits to the exclusive jurisdiction of, and acknowledges the propriety of venue in the United States District Court for the Southern District of New York sitting in New York County, New York, and its appellate courts, as well as any Courts of the State of New York sitting in New York County, New York, and the appellate courts thereof. To the extent not prohibited by applicable law that cannot be waived, the parties hereby waive, and covenant that they will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any action arising in whole or in part under or in connection with this Agreement, whether now existing or hereafter arising, and whether sounding in contract, tort or otherwise. The parties agree that any of them may file a copy of this Section 6(e) with any court as written evidence of the knowing, voluntary and bargained-for agreement between the parties each irrevocably to waive its right to trial by jury in any proceeding whatsoever between them relating to this Agreement, which will instead be tried in a court of competent jurisdiction by a judge sitting without a jury.
(f) Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the matters set forth herein, and there are no other covenants, agreements, promises, terms and provisions, conditions, undertakings or understandings, either oral or written, between them other than those herein set forth. No subsequent alteration, amendment, change, deletion or addition to this Agreement shall be binding upon the parties unless in writing and signed by the parties.
(g) Further Assurances. Each party covenants, on behalf of itself and its successors and assigns, to take all actions and do all things, and to promptly and duly execute, acknowledge and deliver any and all such further instruments and documents necessary or proper to achieve the purposes and objectives of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above, and each party represents and acknowledges that it possesses the requisite authority to execute this Agreement.
| PACHOLDER HIGH YIELD FUND, INC. | ||||||
| By: | /s/ Laura Del Prato | |||||
| Name: Laura Del Prato | ||||||
| Title: Treasurer and Principal Financial Officer | ||||||
| J.P. MORGAN INVESTMENT MANAGEMENT INC. | ||||||
| By: | /s/ Laura Del Prato | |||||
| Name: Laura Del Prato | ||||||
| Title: Managing Director | ||||||
| MORGAN STANLEY & CO. LLC | ||||||
| By: | /s/ Daniel Kelly | |||||
| Name: Daniel Kelly | ||||||
| Title: Executive Director | ||||||
APPENDIX A
TENDER OFFER CONDITIONS:
It is a condition to the Tender Offer that the Fund will not accept tenders or effect repurchases, unless otherwise determined by the Fund’s Board, if: (1) there have been validly tendered and not withdrawn prior to the expiration of the Tender Offer that number of Preferred Shares which represent less than 80% of the Fund’s outstanding Preferred Shares; (2) the Financing Condition (as defined in the Offer to Purchase accompanying the Tender Offer) has not been satisfied or waived; (3) such transactions, if consummated, would (a) result in delisting of the Fund’s common shares from the New York Stock Exchange; (b) impair the Fund’s status as a regulated investment company under the Internal Revenue Code of 1986 (which would make the Fund subject to federal income tax on all of its net income and gains in addition to the taxation of shareholders who receive distributions from the Fund); or (c) result in a liquidation of the Fund or a mandatory redemption due to the failure of the Fund to comply with the applicable maintenance amount or asset coverage requirements in the event any senior securities are issued and outstanding; (4) there shall be instituted or pending before any governmental entity or court any action, proceeding, application or claim, or any judgment, order or injunction sought, or any other action taken by any person or entity, which (a) restrains, prohibits or materially delays the making or consummation of the Tender Offer; (b) challenges the acquisition by the Fund of the ARPS pursuant to the Tender Offer or the Board’s fulfillment of its fiduciary obligations in connection with the Tender Offer; (c) seeks to obtain any material amount of damages in connection with the Tender Offer; or (d) otherwise directly or indirectly materially adversely affects the Tender Offer or the Fund; (5) there is any (a) suspension of or limitation on prices for trading securities generally on the New York Stock Exchange or other national securities exchange(s); (b) declaration of a banking moratorium by Federal or state authorities or any suspension of payment by banks in the United States or New York State; or (c) limitation affecting the Fund or the issuers of its portfolio securities imposed by federal or state authorities on the extension of credit by lending institutions; or (6) the Board determines that effecting any such transaction would constitute a breach of its fiduciary duty owed to the Fund or holders of its Preferred Shares.
Exhibit 99.1
News
For Immediate Release
For additional information contact:
1-877-217-9502
Pacholder High Yield Fund, Inc. Announces Intent to Launch Cash Tender Offer
to Purchase up to 100% of its Auction Rate Cumulative Preferred Stock, Series W
NEW YORK, NEW YORK, February 12, 2016 – Pacholder High Yield Fund, Inc. (NYSE: PHF) (the “Fund”) announced today that its Board of Directors has authorized a cash tender offer to purchase up to 100% of its outstanding shares of the Auction Rate Cumulative Preferred Stock, Series W (the “Preferred Shares”) from holders of the Preferred Shares (the “Preferred Shareholders”) at a price equal to 95.5% of the liquidation preference of $25,000 per share (or $23,875 per share), plus any unpaid accrued dividends. The Fund intends to finance the tender offer using borrowings under a credit facility that the Fund expects to enter into in the near term, subject to completion of the negotiation of a definitive agreement (the “Credit Facility”). Among other conditions, the tender offer is subject to the Fund’s entry into the Credit Facility and the availability of sufficient funds thereunder to finance the purchase of the Preferred Shares in the tender offer (the “Financing Condition”).
Further Information Regarding the Proposed Tender Offer
In addition to the Financing Condition, the tender offer is conditioned upon at least 80% of the outstanding Preferred Shares being validly tendered and not withdrawn (the “Minimum Condition”). Two substantial Preferred Shareholders, RiverNorth Capital Management, LLC and its affiliates and Morgan Stanley & Co. LLC, have provided commitments to the Fund that they will participate in the tender offer. These commitments, if honored, will satisfy the Minimum Condition. In connection with these commitments, the Fund has agreed to commence the tender offer no later than March 11, 2016, and the tender offer will remain open for at least twenty business days following the date of the commencement of the offer. All tendering instructions and a complete explanation of the tender offer’s terms and conditions will be described in the Offer to Purchase, the related Letter of Transmittal, and other materials relating to the tender offer that will be distributed to the Preferred Shareholders upon commencement of the tender offer.
While the Fund’s Board of Directors has authorized the Fund to commence the tender offer, neither the Fund, nor the Board of Directors, nor J.P. Morgan Investment Management Inc., the investment advisor of the Fund, has made any recommendation to any Preferred Shareholder whether to tender or refrain from tendering any Preferred Shares. The Preferred Shareholders are urged to consult their own investment and tax advisors and make their own decisions whether to tender any Preferred Shares and, if so, how many Preferred Shares to tender.
Important Information
The anticipated tender offer described in this press release has not yet commenced. The discussion of the tender offer contained in this press release is for informational purposes only and is not an offer to purchase, nor the solicitation of an offer to sell, any of the Fund’s Preferred Shares. While the Fund intends to commence the tender offer within a reasonable time following the date of this press release and complete the tender offer, there can be no assurances that the Fund will commence or complete the tender offer on the terms described in this press release, or at all. If the Fund commences the tender offer, the offer to purchase and solicitation of the Preferred Shares will be made only pursuant to an Offer to Purchase, the related Letter of Transmittal, and other related materials, as they may be amended or supplemented. Such documents will be distributed to the Preferred Shareholders upon commencement of the tender offer. Preferred Shareholders should read those materials carefully when they become available before making any decisions with respect to the tender offer because they will contain important information. The Fund will also file a Tender Offer Statement on Schedule
TO (the “Tender Offer Statement”) with the Securities and Exchange Commission (the “SEC”). The Tender Offer Statement, the Offer to Purchase, the related Letter of Transmittal, and other related materials, as well as any amendments or supplements, will be available to the Preferred Shareholders for no charge on the SEC’s website (www.sec.gov). The Preferred Shareholders may also obtain a copy of these documents, as well as any other documents that the Fund has filed with the SEC, without charge, by contacting the Fund or through its website at www.pacholder.com.
Forward-Looking Statements
This news release includes forward-looking statements. All statements, other than statements of historical facts, included in this news release that address activities, events, or developments that the Fund expects, believes, or anticipates will or may occur in the future are forward-looking statements. Terminology such as “will,” “may,” “should,” “expect,” “anticipate,” “plan,” “project,” “intend,” “estimate,” “believe,” “target,” “continue,” “potential,” the negative of such terms, or other comparable terminology often identify forward-looking statements. Except as required by law, the Fund undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. All forward-looking statements are qualified in their entirety by these cautionary statements. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of the Fund, which may cause the Fund’s actual results to differ materially from those implied or expressed by the forward-looking statements.
About Pacholder High Yield Fund, Inc.
Pacholder High Yield Fund, Inc. is a closed-end management investment company with a leveraged capital structure. The Fund’s investment objective is to provide a high level of total return through current income and capital appreciation by investing primarily in “high yield, high risk” fixed income securities of domestic companies. The Fund’s investment advisor is J.P. Morgan Investment Management Inc., an investment management firm registered with the SEC under the Investment Advisers Act of 1940.
The information presented here is not intended as a solicitation. New investors cannot purchase shares directly from the Fund. Common shares are listed on the New York Stock Exchange MKT, and interested investors should contact their financial advisor or broker-dealer for more information.
The Fund was organized as a corporation under the laws of Maryland on August 17, 1988 and has registered with the SEC under the Investment Company Act of 1940, as amended. The Fund’s principal office is located at 270 Park Avenue, New York, New York 10017. For more information visit us at www.pacholder.com, or call 1-877-217-9502.
The Fund’s investment adviser is J.P. Morgan Investment Management Inc., an investment management firm registered with the SEC under the Investment Advisers Act of 1940.