BlackRock Commodities Income has announced that its board has decided not to proceed with the discretionary semi-annual tender offer that was due in February 2019. The announcement doesn’t include the underlying rationale for the decision but says that, “Board has concluded that it is not currently in the best interests of shareholders as a whole to implement the tender offer in February 2019”.
No tender offer in February 2019 but board will continue to monitor the discount
While BRCI’s announcement confirms that there will not be a tender offer in February 2019, it does say that the Board will continue to monitor the level of the discount and use its buy-back authority to repurchase shares when it considers it is in shareholders’ interests to do so.
It is noteworthy that the discount has been on a recent widening trend (as at the date of publication and using Morningstar Data, BRCI’s discount has moved between a premium of 3.5% and a discount of 9.5% during the last twelve months, with an average of 5.3%) but the current discount of 3.2% (according to Morningstar) is towards the bottom end of the range. Given BRCI’s size (a market capitalisation of £83.2m according to Morningstar) the board may feel that shrinking the trust further is unhelpful as, all things being equal, this will tend to reduce liquidity and increase the ongoing charges ratio.