The municipal-bond market's largest high-yield fund is poised to offload its biggest position — equity shares of a power company called Vistra Vision LLC.
Nuveen LLC has reached an agreement to sell its 11% stake in Vistra Vision to Vistra Corp., in a deal expected to close in December, according to statement late Wednesday. The transaction will total about $3.25 billion, including a share from Avenue Capital Management.
After the sale is completed, Texas-based Vistra will become the sole owner of its subsidiary Vistra Vision and Nuveen will receive payments it can reinvest into its municipal-bond funds. Vistra is a developer and owner of power plants and the best performing stock in the S&P 500 Index this year.
Nuveen's muni funds had received the unusual equity holdings after Vistra Vision's predecessor, FirstEnergy Solutions,
It became an equity player in Energy Harbor, a firm created out of the FirstEnergy bankruptcy.
Vistra Vision's holdings include four nuclear power plants.
The selloff completes a process lauched in 2023 when Vistra Corp.
The power company made up 8.4% of Nuveen's $16.5 billion high-yield municipal bond fund as of Aug. 31, according to holdings information listed on the firm's
"We want to generate tax-exempt income for the funds and this position doesn't do that," said Dan Close, the head of municipal investments at Nuveen. "This has been a fantastic driver of total returns, but it's time to move on and use the expertise of our muni team to find a new set of opportunities."
High-yield municipal bonds have seen a 7.5% return so far this year, outperforming the broader municipal market by more than 5 percentage points and beating most other fixed-income asset classes, according to data compiled by Bloomberg.
"This is part of a broader initiative to diversify previously concentrated positions," Close said. He reiterated the group is continues to have a "willingness to take on key conviction trades."
