Nuveen offers new breed of ARS

The Nuveen Insured New York Dividend Advantage Municipal Fund, a closed-end mutual fund from Nuveen Inc. of Chicago, announced today its intent to commence a private offering of up to $50 million of what it calls Variable Rate Demand Preferred shares.
It is hoped the sale — the first of its kind — will finally allow investors stuck in auction rate preferred securities previously issued by the fund to cash out at par value.
VRDP shares will be offered only to qualified institutional buyers, such as money market funds.
Proceeds from the offering are expected to be used, in conjunction with proceeds from the creation of tender option bond trusts by the fund, to redeem all of the fund’s outstanding ARPS, which are valued at $61 million, according to a statement from Nuveen.
The fund is seeking to complete the offering within 30 days, at which time a formal redemption notice for the ARPS will be issued.
VRDP shares will include a liquidity feature that allows holders to have their shares purchased by a liquidity provider in the event that sell orders have not been matched with purchase orders in a remarketing.
The liquidity feature initially will be provided by Deutsche Bank AG of Frankfurt, Germany.
VRDP dividends will be set weekly at a rate established by a remarketing agent.
Conditions to the fund’s issuance of VRDP shares will include the receipt of short-term credit ratings for the VRDP that are in the highest rating category from two nationally recognized statistical rating organizations.