First Trust Senior Floating Rate 2022 Target Term Fund (the
"Fund") (NYSE: FIV) has decreased its regularly scheduled monthly
common share distribution to $0.0303 per share from $0.0328 per
share. The distribution will be payable on August 15, 2019, to
shareholders of record as of August 2, 2019. The ex-dividend date
is expected to be August 1, 2019. The monthly distribution
information for the Fund appears below.
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV):
Distribution per share:
$0.0303
Distribution Rate based on the July 19,
2019 NAV of $9.51:
3.82%
Distribution Rate based on the July 19,
2019 closing market price of $9.05:
4.02%
Decrease from previous distribution of
$0.0328:
-7.62%
The majority, and possibly all, of this distribution will be
paid out of net investment income earned by the Fund. A portion of
this distribution may come from net short-term realized capital
gains or return of capital. The final determination of the source
and tax status of all distributions paid in 2019 will be made after
the end of 2019 and will be provided on Form 1099-DIV.
The Fund is a diversified, closed-end management investment
company. The Fund's investment objectives are to seek a high level
of current income and to return $9.85 per common share of
beneficial interest ("Common Share") of the Fund (the original net
asset value ("Original NAV") per Common Share before deducting
offering costs of $0.02 per Common Share) to the holders of Common
Shares on or about February 1, 2022 (the "Termination Date"). The
Fund will attempt to strike a balance between the two objectives,
seeking to provide as high a level of current income as is
consistent with the Fund's overall credit performance, on the one
hand, and its objective of returning the Original NAV on or about
the Termination Date on the other. However, as the Fund approaches
the Termination Date, its monthly distributions are likely to
decline, and there can be no assurance that the Fund will achieve
either of its investment objectives or that the Fund's investment
strategies will be successful. Under normal market conditions, the
Fund will seek to achieve its investment objectives by investing at
least 80% of its Managed Assets in senior, secured floating-rate
loans ("Senior Loans") of any maturity. Senior Loans are made to
U.S. and non-U.S. corporations, partnerships and other business
entities which operate in various industries and geographical
regions. Senior Loans are typically rated below investment grade.
As it nears the Termination Date, the Fund may invest in higher
credit quality instruments with maturities extending beyond the
Termination Date to seek to improve the liquidity of its portfolio
and reduce investment risk. Investing in higher credit quality
instruments may reduce the amount available for distribution to
Common Shareholders.
To seek to achieve the Fund’s investment objective to return
Original NAV to investors on or about the Termination Date, the
monthly distribution has been reduced. While the current income
remains stable, the difference between the amount the Fund earns
and the amount that is distributed is intended to benefit the NAV.
Moreover, the portfolio management team anticipates actively
reducing the Fund’s leverage and shifting the portfolio composition
to shorter dated higher quality holdings over the next three years
as the Termination Date approaches. As a result of these actions,
investors should anticipate periodic reductions in the Fund’s
distribution per share going forward.
First Trust Advisors L.P. ("FTA") is a federally registered
investment advisor and serves as the Fund's investment advisor. FTA
and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA
registered broker-dealer, are privately-held companies that provide
a variety of investment services. FTA has collective assets under
management or supervision of approximately $133 billion as of June
30, 2019 through unit investment trusts, exchange-traded funds,
closed-end funds, mutual funds and separate managed accounts. FTA
is the supervisor of the First Trust unit investment trusts, while
FTP is the sponsor. FTP is also a distributor of mutual fund shares
and exchange-traded fund creation units. FTA and FTP are based in
Wheaton, Illinois.
Past performance is no assurance of future results. Investment
return and market value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their
original cost. There can be no assurance that the Fund’s investment
objectives will be achieved. The Fund may not be appropriate for
all investors.
Principal Risk Factors: The Fund will typically invest in senior
loans rated below investment grade, which are commonly referred to
as "junk" or "high yield" securities and considered speculative
because of the credit risk of their issuers. Such issuers are more
likely than investment grade issuers to default on their payments
of interest and principal owed to the Fund, and such defaults could
reduce the Fund's NAV and income distributions. An economic
downturn would generally lead to a higher non-payment rate, and a
senior loan may lose significant market value before a default
occurs. Moreover, any specific collateral used to secure a senior
loan may decline in value or become illiquid, which would adversely
affect the senior loan's value.
Senior Loans are structured as floating rate instruments in
which the interest rate payable on the obligation fluctuates with
interest rate changes. As a result, the yield on Senior Loans will
generally decline in a falling interest rate environment, causing
the Fund to experience a reduction in the income it receives from a
Senior Loan. In addition, the market value of Senior Loans may fall
in a declining interest rate environment and may also fall in a
rising interest rate environment if there is a lag between the rise
in interest rates and the reset. Many Senior Loans have a minimum
base rate, or floor (typically, a "LIBOR floor"), which will be
used if the actual base rate is below the minimum base rate. To the
extent the Fund invests in such Senior Loans, the Fund may not
benefit from higher coupon payments during periods of increasing
interest rates as it otherwise would from investments in Senior
Loans without any floors until rates rise to levels above the LIBOR
floors. As a result, the Fund may lose some of the benefits of
incurring leverage. Specifically, if the Fund's Borrowings have
floating dividend or interest rates, its costs of leverage will
increase as rates increase. In this situation, the Fund will
experience increased financing costs without the benefit of
receiving higher income. This in turn may result in the potential
for a decrease in the level of income available for dividends or
distributions to be made by the Fund.
The Fund's limited term may cause it to invest in lower-yielding
securities or hold the proceeds of securities sold near the end of
its term in cash or cash equivalents, which may adversely affect
the performance of the Fund or the Fund's ability to maintain its
dividend.
A second lien loan may have a claim on the same collateral pool
as the first lien or it may be secured by a separate set of assets.
Second lien loans are typically secured by a second priority
security interest or lien on specified collateral securing the
Borrower's obligation under the interest. Because second lien loans
are second to first lien loans, they present a greater degree of
investment risk. Specifically, these loans are subject to the
additional risk that the cash flow of the Borrower and property
securing the loan may be insufficient to meet scheduled payments
after giving effect to those loans with a higher priority. In
addition, loans that have a lower than first lien priority on
collateral of the Borrower generally have greater price volatility
than those loans with a higher priority and may be less liquid.
However, second lien loans often pay interest at higher rates than
first lien loans reflecting such additional risks.
Because the assets of the Fund will be liquidated in connection
with its termination, the Fund may be required to sell portfolio
securities when it otherwise would not, including at times when
market conditions are not favorable, or at a time when a particular
security is in default or bankruptcy, or otherwise in severe
distress, which may cause the Fund to lose money. Although the Fund
has an investment objective of returning Original NAV to Common
Shareholders on or about the Termination Date, the Fund may not be
successful in achieving this objective. The return of Original NAV
is not an express or implied guarantee obligation of the Fund.
There can be no assurance that the Fund will be able to return
Original NAV to Common Shareholders, and such return is not backed
or otherwise guaranteed by the Advisor or any other entity.
The risks of investing in the Fund are spelled out in the
shareholder reports and other regulatory filings.
The information presented is not intended to constitute an
investment recommendation for, or advice to, any specific person.
By providing this information, First Trust is not undertaking to
give advice in any fiduciary capacity within the meaning of ERISA,
the Internal Revenue Code or any other regulatory framework.
Financial advisors are responsible for evaluating investment risks
independently and for exercising independent judgment in
determining whether investments are appropriate for their
clients.
The Fund's daily closing New York Stock Exchange price and net
asset value per share as well as other information can be found at
www.ftportfolios.com or by calling 1-800-988-5891.
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version on businesswire.com: https://www.businesswire.com/news/home/20190722005721/en/
Contact: Press Inquiries Jane Doyle 630-765-8775 Analyst
Inquiries Jeff Margolin 630-915-6784 Broker Inquiries Jeff Margolin
630-915-6784
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