First Trust Advisors L.P. ("FTA") announced today that its
Leveraged Finance Investment Team, portfolio manager for the First
Trust Senior Floating Rate Income Fund II (NYSE: FCT), First Trust
Senior Floating Rate 2022 Target Term Fund (NYSE: FIV) and First
Trust High Yield Opportunities 2027 Term Fund (NYSE: FTHY) (each a
"Fund" or collectively, the "Funds"), will release an update on the
market and the Funds for financial professionals and investors. The
update will be available Wednesday,
November 3, 2021, at 5:00 P.M. Eastern Time until 11:59 P.M.
Eastern Time on Friday, December 3, 2021. To listen to
the update, follow these instructions:
-- Dial: 888-203-1112; International
719-457-0820; and Passcode #8000210. The update will be available
from Wednesday, November 3, 2021, at 5:00 P.M. Eastern Time until
11:59 P.M. Eastern Time on Friday, December 3, 2021.
FCT is a diversified, closed-end management investment company.
The Fund's primary investment objective is to seek a high level of
current income. As a secondary objective, the Fund attempts to
preserve capital. The Fund pursues these investment objectives by
investing primarily in senior secured floating-rate corporate
loans. Under normal market conditions, the Fund will invest at
least 80% of its Managed Assets in lower grade debt
FIV is a diversified, closed-end management investment company.
The Fund has investment objectives to seek a high level of current
income and to return $9.85 per Common Share to holders of the
Common Shares at termination. On September 14, 2021 the Fund
announced that the Fund’s Board of Trustees approved the
liquidation and termination of the Fund on December 15, 2021
(“Termination Date”), ahead of the original termination date of
February 1, 2022. In accordance with its early termination, the
Fund’s common shares are expected to cease trading on the New York
Stock Exchange on or about December 9, 2021 and will be suspended
from trading before the open of trading on or about December 10,
2021. The Fund anticipates making its final liquidating
distribution on or about the termination date to holders of the
Fund’s Common Shares of record on December 13, 2021. The Fund has
entered its wind-up period in anticipation of its termination and,
accordingly, may deviate from its investment objectives and
policies. As of September 30, 2021, the Fund eliminated its
leverage line and as the Termination Date approaches, Fund managers
will continue to transition the Fund's portfolio from
non-investment grade senior loans to high quality, short-term
instruments or cash and cash equivalents. In light of the foregoing
and current market conditions, the Fund anticipates the income
earned by its portfolio investments will be reduced and, as such,
the Fund and First Trust Advisors L.P., the investment advisor of
the Fund ("FTA"), have entered into, and the Board has approved, an
agreement whereby FTA has agreed to waive the management fee
payable by the Fund for the period beginning September 1, 2021
through the Termination Date.
As previously announced, due in part to the impact of the
COVID-19 pandemic on market conditions and the U.S. economy
beginning in March 2020, it is unlikely that FIV will achieve its
objective of returning $9.85 per Common Share to holders of the
Common Shares upon termination. The Fund's net asset value as of
October 28, 2021 was $9.75.
FTHY is a diversified, closed-end management investment company.
The Fund's investment objective is to provide current income. Under
normal market conditions, the Fund will seek to achieve its
investment objective by investing at least 80% of its managed
assets in high yield debt securities of any maturity that are rated
below investment grade at the time of purchase or unrated
securities determined by First Trust Advisors L.P. ("FTA") to be of
comparable quality. High yield debt securities include U.S. and
non-U.S. corporate debt obligations and senior, secured floating
rate loans ("Senior Loans"). Securities rated below investment
grade are commonly referred to as "junk" or "high yield" securities
and are considered speculative with respect to the issuer's
capacity to pay interest and repay principal. There can be no
assurance that the Fund's investment strategies will be
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 $207 billion as of September 30, 2021 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,
Principal Risk Factors: Past performance is no assurance of
future results. Investment return and market value of an investment
in the Funds will fluctuate. Shares, when sold, may be worth more
or less than their original cost. There can be no assurance that
the Funds’ investment objectives will be achieved. The Funds may
not be appropriate for all investors.
Securities held by a fund, as well as shares of a fund itself,
are subject to market fluctuations caused by factors such as
general economic conditions, political events, regulatory or market
developments, changes in interest rates and perceived trends in
securities prices. Shares of a fund could decline in value or
underperform other investments as a result of the risk of loss
associated with these market fluctuations. In addition, local,
regional or global events such as war, acts of terrorism, spread of
infectious diseases or other public health issues, recessions, or
other events could have a significant negative impact on a fund and
its investments. Such events may affect certain geographic regions,
countries, sectors and industries more significantly than others.
The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in
global financial markets, which have caused losses for investors.
While the development of vaccines has slowed the spread of the
virus and allowed for the resumption of "reasonably" normal
business activity in the United States, many countries continue to
impose lockdown measures in an attempt to slow the spread.
Additionally, there is no guarantee that vaccines will be effective
against emerging variants of the disease.
Shares of closed-end investment companies such as the Funds
frequently trade at a discount from their net asset value. Each
Fund cannot predict whether its common shares will trade at, below
or above net asset value.
The Funds are subject to various risks including: The Funds 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
Funds, and such defaults could reduce the Funds’ 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
The senior loan market has seen an increase in loans with weaker
lender protections which may impact recovery values and/or trading
levels in the future. The absence of financial maintenance
covenants in a loan agreement generally means that the lender may
not be able to declare a default if financial performance
deteriorates. This may hinder the Funds’ ability to reprice credit
risk associated with a particular borrower and reduce the Funds’
ability to restructure a problematic loan and mitigate potential
loss. As a result, the Funds’ exposure to losses on investments in
senior loans may be increased, especially during a downturn in the
credit cycle or changes in market or economic conditions.
To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as
a reference interest rate, it is subject to LIBOR Risk. The United
Kingdom's Financial Conduct Authority, which regulates LIBOR, will
cease making LIBOR available as a reference rate over a phase-out
period that will begin immediately after December 31, 2021. The
unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in
costs incurred in connection with closing out positions and
entering into new trades. Any potential effects of the transition
away from LIBOR on the Funds or on certain instruments in which the
Funds invest can be difficult to ascertain, and they may vary
depending on a variety of factors, and they could result in losses
to the Funds.
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 Funds invest in such Senior Loans, the Funds 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 Funds may lose some of the benefits of
incurring leverage. Specifically, if the Funds' Borrowings have
floating dividend or interest rates, their costs of leverage will
increase as rates increase. In this situation, the Funds 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 Funds.
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.
Portfolio holdings that are valued using techniques other than
market quotations may be subject to greater fluctuation in their
valuations from one day to the next than if market quotations were
FIV's and FTHY'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 Funds or the Funds’ ability
to maintain its dividend.
Because the assets of FIV and FTHY will be liquidated in
connection with its respective 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
Although FIV 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. Based on current market conditions and expectations, the
fund believes it is unlikely to achieve its objective of returning
$9.85 per Common Share upon termination.
FCT and FTHY may invest in securities that may be in default or
distressed. Distressed securities present a substantial risk of
future default which may cause the fund to incur losses, including
additional expenses, to the extent it is required to seek recovery
upon a default in the payment of principal or interest on those
Certain FCT and FTHY investments may be subject to restrictions
on resale, trade over-the-counter market or in limited volume, or
lack an active trading market. Illiquid securities may trade at a
discount and may be subject to wide fluctuations in market
FTHY’s securities of non-U.S. issuers are subject to additional
risks, including currency fluctuations, political risks,
withholding, the lack of adequate financial information, and
exchange control restrictions impacting non-U.S. issuers. Changes
in currency exchange rates and the relative value of non-US
currencies may affect the value of the Fund's investments and the
value of the Fund's shares.
The Funds’ portfolios are subject to credit risk, interest rate
risk, liquidity risk, prepayment risk and reinvestment risk.
Interest rate risk is the risk that fixed-income securities will
decline in value because of changes in market interest rates.
Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments
when due and that the value of a security may decline as a result.
Credit risk may be heightened for the Funds because they invest in
below investment grade securities. Liquidity risk is the risk that
the Funds may have difficulty disposing of senior loans if they
seek to repay debt, pay dividends or expenses, or take advantage of
a new investment opportunity. Prepayment risk is the risk that,
upon a prepayment, the actual outstanding debt on which the Funds
derive interest income will be reduced. The Funds may not be able
to reinvest the proceeds received on terms as favorable as the
prepaid loan. Reinvestment risk is the risk that income from the
Funds’ portfolio will decline if the Funds invest the proceeds from
matured, traded or called instruments at market interest rates that
are below the Funds’ portfolio's current earnings rate.
Any shortcomings or inefficiencies in credit rating agencies'
processes for determining credit ratings may adversely affect the
credit ratings of securities held by the Funds.
First Trust and the Funds’ portfolio managers have interests
that may conflict with the interests of a Fund. First Trust manages
and/or advises funds with similar investment objectives and
strategies as the Funds. In addition, the use of leverage increases
the amount of management and advisory fees paid to First Trust and
therefore, First Trust has a financial incentive to leverage a
Use of leverage can result in additional risk and cost, and can
magnify the effect of any losses.
The implementation of a Fund's investment strategy depends upon
the continued contributions of the portfolio management team and
the loss or interruption of services of a key member of that team
could have a negative impact on the Fund.
As the use of Internet technology has become more prevalent in
the course of business, a Fund has become more susceptible to
potential operational risks through breaches in cyber security.
The risks of investing in the Funds 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 professionals are responsible for evaluating investment
risks independently and for exercising independent judgment in
determining whether investments are appropriate for their
The Funds’ 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.
version on businesswire.com: https://www.businesswire.com/news/home/20211101005721/en/
JEFF MARGOLIN — (630) 915-6784
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