Five Pimco funds redeem $225M of ARS

Five closed-end mutual funds advised by Pacific Investment Management Co. will redeem an additional $225 million in illiquid auction rate securities. It is the second such announcement from the Pimco funds, which last month announced plans to redeem $342 million of the securities. The decision is a reversal for Pimco, which had refused to buy back the securities, saying such action would result in reduced leverage that would hurt shareholders in its closed-end funds, according to the Wall Street Journal. That position infuriated brokers and preferred shareholders who wanted the securities redeemed at full value. Thomas James, chief executive of Raymond James Financial Inc. of St. Petersburg, Fla., said he was even contemplating suing Pimco over the firm’s refusal to redeem the securities (InvestmentNews, March12). The securities became illiquid when the auction market froze in February 2008. The Pimco funds that will offer redemptions include the Corporate Income Fund (PCN), the Corporate Opportunity Fund (PTY), the High Income Fund (PHK), the Floating Rate Income Fund (PFL) and the Floating Rate Strategy Fund (PFN). Redemptions will begin on March 30, except for the Floating Rate Income Fund which won’t start to buy back securities until April 1.