U.S. District Court for the Southern District of New York Denies BlackRock’s Motion to Dismiss Saba Capital’s Entrenchment Bylaw Lawsuit
26 6월 2024 - 9:10AM
Business Wire
Court Concludes BlackRock’s View That ECAT Can
Continually Have Failed Elections Is “Simply Not Plausible”
Court Concludes Saba Has Sufficiently Alleged
That There Is a Point Where ECAT’s Voting Bylaws “Operate to
Deprive Shareholders of Their Right to Select the Trustees of The
Fund”
Saba Capital Management, L.P. (together with certain of its
affiliates, “Saba” or “we”) today commented on a ruling in the
lawsuit it brought in the United States District Court for the
Southern District of New York (the “Court”) against the BlackRock
ESG Capital Allocation Term Trust (NYSE: ECAT) (“ECAT”), and all 10
incumbent trustees to hold them accountable for adopting an illegal
“Entrenchment Bylaw” that deprives shareholders of their right to
elect directors annually. These directors were previously found to
have violated the Investment Company Act (“ICA”) by enacting a
separate bylaw targeted at entrenching themselves to protect
BlackRock from being held accountable by shareholders.
Key points from U.S. District Judge Margaret M. Garnett’s ruling
include the following:
- The Court agreed that Saba is allowed
to sue ECAT and its trustees for ECAT’s majority vote
standard. Judge Garnett wrote that “Saba has
sufficiently alleged that there is a point where the voting bylaws
of ECAT operate to deprive shareholders of their right to select
the trustees of the fund, and to circumvent the ICA’s requirement
that trustees be ‘elected’ at shareholder ‘meetings’ and that a
certain number of directors be resubmitted for shareholder approval
each year.”
- The Court stated that it is not
permissible for ECAT to perpetually have failed elections and hold
over its incumbent trustees as a result of its voting
standard. The Court wrote: “The alternative proposed by
Defendants is simply not plausible: that even where a fund fails to
have successful elections for years and where a fund’s board is
composed primarily or entirely of holdovers selected by the sole
initial shareholder who is affiliated with the investment advisor,
even in perpetuity, there is no
circumstance where such a fund could be found to be in violation of
the ICA’s requirements for shareholder elections and board
composition [...]”
- The Court rejected BlackRock’s
attempts to smear Saba as an “activist investor.” The
Court stated, “The Court gives no weight to those
characterizations; for purposes of the relevant sections of the
ICA, Saba’s primary identity is that of ‘shareholder,’ entitled to
no fewer rights than any other shareholder.”
Michael D’Angelo, Partner and General Counsel of Saba, said:
“In rejecting BlackRock’s motion to dismiss, the Court has paved
a clear path for Saba to win at trial. There, we will show why this
entrenched manager and its trustees cannot continue to act as if
federal law does not apply to their closed-end funds. Failed
elections and holdover trustees cannot exist in perpetuity at any
closed-end fund.”
About Saba Capital
Saba Capital Management, L.P. is a global alternative asset
management firm that seeks to deliver superior risk-adjusted
returns for a diverse group of clients. Founded in 2009 by Boaz
Weinstein, Saba is a pioneer of credit relative value strategies
and capital structure arbitrage. Saba is headquartered in New York
City. Learn more at www.sabacapital.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20240625326221/en/
Longacre Square Partners Charlotte Kiaie / Kate Sylvester,
646-386-0091 ckiaie@longacresquare.com /
ksylvester@longacresquare.com
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