Completes New Preferred Share and Senior Note Offerings to Strengthen Capital Structure
(NYSE: FINS) has announced the completion of a $50 million private offering of Series A Mandatorily Redeemable Preferred Shares (MRPS), while also entering into a separate agreement for a $40 million private offering of Series C Senior Notes. The transactions represent a significant step in the fund’s ongoing capital management strategy as it seeks to refinance existing debt obligations, optimize leverage, and position itself for future investment opportunities.
The newly issued Series A MRPS are scheduled to mature on April 30, 2031, and have received an A3 rating from . Meanwhile, the Series C Senior Notes, which mature on July 8, 2030, have been assigned an A1 rating by Moody’s, reflecting strong perceived credit quality and repayment capacity.
The financing activities come as the fund and its adviser continue navigating evolving interest-rate conditions and shifting fixed-income market dynamics. Management believes the expanded leverage structure will provide additional flexibility to pursue attractive income-generating investments while supporting long-term shareholder value creation.
Refinancing Existing Debt and Expanding Investment Capacity
According to the fund, proceeds from the $50 million MRPS issuance will primarily be used to refinance existing debt obligations and support new portfolio investments.
The move reflects a broader strategy by the fund to actively manage its balance sheet and optimize financing arrangements in response to current market conditions. By refinancing portions of its capital structure with longer-dated financing instruments, the fund aims to improve flexibility and maintain access to capital for future deployment opportunities.
The additional liquidity generated through the transaction may also allow the fund to capitalize on opportunities in credit and income-oriented investment markets, particularly during periods of market volatility and changing interest-rate environments.
In addition to the MRPS offering, the fund entered into a Notes Purchase Agreement related to a private placement of $40 million in Series C Senior Notes.
The proceeds from the Series C Notes will specifically be used to redeem the fund’s existing 2.35% Series A Senior Notes, which are scheduled to mature on July 8, 2026.
The Series C Notes include a delayed draw structure, meaning the financing will become active closer to the maturity date of the Series A Notes, effectively replacing the maturing debt instrument while extending the fund’s financing timeline through 2030.
Understanding the Fund’s Leverage Strategy
Leverage plays an important role in many closed-end income funds, particularly those focused on generating enhanced yield through fixed-income and credit-oriented investment strategies.
By borrowing capital or issuing preferred shares, funds can increase the amount of investable assets within their portfolios. When managed effectively, leverage may enhance returns and income generation if the yield earned on investments exceeds the cost of financing.
, the fund’s investment adviser, stated that it expects the strategic use of leverage to continue benefiting income generation due to favorable interest-rate differentials between portfolio earnings and financing costs.
The adviser also believes the newly issued MRPS and Series C Notes will strengthen the fund’s ability to pursue value creation opportunities for shareholders while maintaining flexibility for future capital deployment.
The fund’s current leverage structure now includes several financing instruments across varying maturities and costs.
Current Leverage Overview
The fund disclosed the following components of its leverage profile:
- Repurchase agreement leverage totaling approximately $75.5 million
- $40 million of 5.364% Series C Notes maturing July 8, 2030
- $45 million of 2.80% Series B Senior Notes maturing July 8, 2028
- $50 million of Series A Mandatorily Redeemable Preferred Shares maturing April 30, 2031
The staggered maturity structure allows the fund to diversify refinancing risk while managing long-term funding obligations more strategically.
What Are Mandatorily Redeemable Preferred Shares?
Mandatorily Redeemable Preferred Shares are a financing instrument commonly used by closed-end funds and other investment vehicles seeking long-term capital while maintaining flexibility within their broader leverage structure.
Unlike common equity, MRPS generally:
- Pay fixed or variable dividend rates
- Carry redemption obligations at specified future dates
- Rank senior to common shares in the capital structure
- Provide stable financing over defined terms
Because the shares must be redeemed at maturity, they function similarly to long-term debt instruments while retaining certain equity-like characteristics.
For investment funds, MRPS can offer a more stable source of financing compared to short-term borrowing arrangements, particularly during periods of market volatility or changing interest-rate conditions.
The A3 rating assigned by Moody’s suggests that the securities are considered upper-medium grade and subject to relatively low credit risk.
Senior Notes Support Long-Term Financing Stability
The fund’s Series C Senior Notes further extend the maturity profile of its financing structure.
Senior notes are debt instruments that typically rank ahead of equity securities in repayment priority and are often used by investment funds to secure predictable long-term financing.
The A1 rating assigned to the Series C Notes reflects strong credit quality according to Moody’s rating framework.
By replacing the maturing Series A Senior Notes with the new Series C issuance, the fund can extend financing availability while maintaining access to institutional debt markets.
This strategy may help reduce refinancing uncertainty and support long-term portfolio management flexibility.
Navigating a Changing Interest-Rate Environment
The fund’s financing activity comes amid continued uncertainty in global fixed-income markets and interest-rate policy.
Over the past several years, financial markets have experienced substantial shifts due to:
- Central bank rate adjustments
- Inflationary pressures
- Credit market volatility
- Economic growth concerns
- Changing liquidity conditions
These factors have significantly influenced financing costs and investment opportunities across the fixed-income landscape.
Closed-end funds and income-focused investment vehicles have increasingly sought to rebalance leverage structures and extend financing maturities to better manage evolving market risks.
For funds utilizing leverage strategies, maintaining an effective balance between borrowing costs and investment income remains critical to long-term performance.
Angel Oak Capital Advisors indicated that the current market environment presents opportunities for disciplined capital deployment, particularly for managers capable of accessing diversified financing sources.
Focus on Income Generation
Angel Oak Financial Strategies Income Term Trust primarily focuses on generating current income through investments in financial institutions and related credit-oriented securities.
The fund’s portfolio strategy typically includes exposure to:
- Bank debt securities
- Mortgage-backed securities
- Structured credit products
- Financial institution bonds
- Other income-producing investments
By utilizing leverage strategically, the fund seeks to enhance portfolio yield and generate attractive distributions for shareholders.
However, leverage can also increase risk exposure, particularly during periods of market stress or rapidly rising financing costs. As a result, managing leverage prudently remains a central component of closed-end fund portfolio management.
The combination of preferred shares, senior notes, and repurchase agreement financing allows the fund to diversify its funding sources while balancing cost, maturity, and liquidity considerations.
Annual Shareholder Meeting Scheduled for September 2026
In addition to announcing the financing transactions, the fund also confirmed details regarding its upcoming annual shareholder meeting.
The fund’s Board of Trustees has scheduled the Annual Shareholder Meeting for September 25, 2026, at 1:00 p.m. Eastern Time. The meeting will take place at the offices of Angel Oak Capital Advisors in Atlanta, Georgia.
The record date for determining shareholder eligibility to vote at the meeting has been set for July 10, 2026.
The meeting agenda includes several governance-related proposals and trustee elections.
Trustee Elections and Governance Proposals
At the annual meeting, shareholders will vote on proposals including the election of trustees and amendments to governance provisions within the fund’s Declaration of Trust.
Shareholders will be asked to elect:
- Keith M. Schappert as a Class II Trustee
- Andrea N. Mullins as a Class II Trustee
Additionally, holders of the newly issued MRPS will vote separately on the election of Ira P. Cohen as a Class III Trustee.
The meeting will also include a proposal to amend the fund’s Declaration of Trust to reduce the voting threshold required for removing a trustee for cause.
Under the proposed amendment:
- The shareholder removal threshold would decrease from 75% to 66.67%
- The trustee removal threshold would also decrease from 75% to 66.67%
The proposed governance changes may provide shareholders and trustees with greater flexibility in future governance matters.
Additional Meeting Matters
Other items scheduled for shareholder consideration include:
- Approval of adjournments for additional proxy solicitation if necessary
- Ratification of as the fund’s independent registered public accounting firm for the fiscal year ending January 31, 2027
- Consideration of any additional business properly brought before the meeting
The fund also outlined procedural requirements for shareholder proposals and nominations in accordance with its bylaws and applicable securities regulations.
Strategic Positioning for Long-Term Growth
The combination of new financing transactions and governance updates reflects Angel Oak Financial Strategies Income Term Trust’s broader effort to position itself for long-term operational flexibility and income generation.
By extending financing maturities, diversifying leverage sources, and strengthening liquidity capacity, the fund aims to maintain a competitive position within the income-focused investment market.
At the same time, the adviser’s emphasis on disciplined capital deployment suggests a continued focus on identifying opportunities across financial institution credit and structured income markets.
As fixed-income markets continue evolving amid changing economic conditions, investors are likely to remain focused on how leveraged income funds manage financing costs, portfolio risk, and distribution sustainability.
For Angel Oak Financial Strategies Income Term Trust, the newly announced financing initiatives represent an important step in supporting future investment activity while maintaining a structured and diversified capital foundation.
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