First Trust High Yield Opportunities 2027 Term Fund (the "Fund")
(NYSE: FTHY) has declared the Fund’s regularly scheduled monthly
common share distribution in the amount of $0.13 per share payable
on September 25, 2024, to shareholders of record as of September 3,
2024. The ex-dividend date is expected to be September 3, 2024. The
monthly distribution information for the Fund appears below.
First Trust High
Yield Opportunities 2027 Term Fund (FTHY):
Distribution per share:
$0.13
Distribution Rate based on the August 19,
2024 NAV of $15.41:
10.12%
Distribution Rate based on the August 19,
2024 closing market price of $14.78:
10.55%
This distribution will consist of net investment income earned
by the Fund and return of capital and may also consist of net
short-term realized capital gains. The final determination of the
source and tax status of all distributions paid in 2024 will be
made after the end of 2024 and will be provided on Form
1099-DIV.
The Fund has a practice of seeking to maintain a relatively
stable monthly distribution which may be changed periodically.
First Trust Advisors L.P. ("FTA") believes the practice may benefit
the Fund's market price and premium/discount to the Fund's NAV. The
practice has no impact on the Fund's investment strategy and may
reduce the Fund's NAV.
The Fund is a diversified, closed-end management investment
company. The Fund's investment objective is to provide current
income. Under normal market conditions, the Fund will seek to
achieve its investment objective by investing at least 80% of its
managed assets in high yield debt securities of any maturity that
are rated below investment grade at the time of purchase or unrated
securities determined by First Trust Advisors L.P. ("FTA") to be of
comparable quality. High yield debt securities include U.S. and
non-U.S. corporate debt obligations and senior, secured floating
rate loans ("Senior Loans"). Securities rated below investment
grade are commonly referred to as "junk" or "high yield" securities
and are considered speculative with respect to the issuer's
capacity to pay interest and repay principal. There can be no
assurance that the Fund will achieve its investment objective or
that the Fund's investment strategies will be successful.
First Trust Advisors L.P. ("FTA") is a federally registered
investment advisor and serves as the Fund's investment advisor. FTA
and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA
registered broker-dealer, are privately-held companies that provide
a variety of investment services. FTA has collective assets under
management or supervision of approximately $235 billion as of July
31, 2024 through unit investment trusts, exchange-traded funds,
closed-end funds, mutual funds and separate managed accounts. FTA
is the supervisor of the First Trust unit investment trusts, while
FTP is the sponsor. FTP is also a distributor of mutual fund shares
and exchange-traded fund creation units. FTA and FTP are based in
Wheaton, Illinois.
Principal Risk Factors: Risks are inherent in all investing.
Certain risks applicable to the Fund are identified below, which
includes the risk that you could lose some or all of your
investment in the Fund. The principal risks of investing in the
Fund are spelled out in the Fund's annual shareholder reports. The
order of the below risk factors does not indicate the significance
of any particular risk factor. The Fund also files reports, proxy
statements and other information that is available for
review.
Past performance is no assurance of future results. Investment
return and market value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their
original cost. There can be no assurance that the Fund's investment
objectives will be achieved. The Fund may not be appropriate for
all investors.
Market risk is the risk that a particular investment, or shares
of a fund in general may fall in value. Investments held by the
Fund are subject to market fluctuations caused by real or perceived
adverse economic conditions, political events, regulatory factors
or market developments, changes in interest rates and perceived
trends in securities prices. Shares of a fund could decline in
value or underperform other investments as a result. In addition,
local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns,
regulatory actions, political changes, diplomatic developments, the
imposition of sanctions and other similar measures, spread of
infectious disease or other public health issues, recessions,
natural disasters or other events could have significant negative
impact on a fund and its investments.
Current market conditions risk is the risk that a particular
investment, or shares of the fund in general, may fall in value due
to current market conditions. As a means to fight inflation, the
Federal Reserve and certain foreign central banks have raised
interest rates and expect to continue to do so, and the Federal
Reserve has announced that it intends to reverse previously
implemented quantitative easing. Recent and potential future bank
failures could result in disruption to the broader banking industry
or markets generally and reduce confidence in financial
institutions and the economy as a whole, which may also heighten
market volatility and reduce liquidity. Ongoing armed conflicts
between Russia and Ukraine in Europe and among Israel, Hamas and
other militant groups in the Middle East, have caused and could
continue to cause significant market disruptions and volatility
within the markets in Russia, Europe, the Middle East and the
United States. The hostilities and sanctions resulting from those
hostilities have and could continue to have a significant impact on
certain fund investments as well as fund performance and liquidity.
The COVID-19 global pandemic, or any future public health crisis,
and the ensuing policies enacted by governments and central banks
have caused and may continue to cause significant volatility and
uncertainty in global financial markets, negatively impacting
global growth prospects.
The Fund will typically invest in securities rated below
investment grade, which are commonly referred to as "junk" or "high
yield" securities and considered speculative because of the credit
risk of their issuers. Such issuers are more likely than investment
grade issuers to default on their payments of interest and
principal owed to the Fund, and such defaults could reduce the
Fund's NAV and income distributions. An economic downturn would
generally lead to a higher non-payment rate, and a high yield
security may lose significant market value before a default occurs.
Moreover, any specific collateral used to secure a high yield
security may decline in value or become illiquid, which would
adversely affect the high yield security's value.
The debt securities in which the Fund invests are subject to
certain risks, including issuer risk, reinvestment risk, prepayment
risk, credit risk, and interest rate risk. Issuer risk is the risk
that the value of fixed-income securities may decline for a number
of reasons which directly relate to the issuer. Reinvestment risk
is the risk that income from the Fund's portfolio will decline if
the Fund invests the proceeds from matured, traded or called bonds
at market interest rates that are below the Fund portfolio's
current earnings rate. Prepayment risk is the risk that, upon a
prepayment, the actual outstanding debt on which the Fund derives
interest income will be reduced. Credit risk is the risk that an
issuer of a security will be unable or unwilling to make dividend,
interest and/or principal payments when due and that the value of a
security may decline as a result. Interest rate risk is the risk
that fixed-income securities will decline in value because of
changes in market interest rates.
Senior Loans are structured as floating rate instruments in
which the interest rate payable on the obligation fluctuates with
interest rate changes. As a result, the yield on Senior Loans will
generally decline in a falling interest rate environment, causing
the Fund to experience a reduction in the income it receives from a
Senior Loan. In addition, the market value of Senior Loans may fall
in a declining interest rate environment and may also fall in a
rising interest rate environment if there is a lag between the rise
in interest rates and the reset. Many Senior Loans have a minimum
base rate, or floor, which will be used if the actual base rate is
below the minimum base rate. To the extent the Fund invests in such
Senior Loans, the Fund may not benefit from higher coupon payments
during periods of increasing interest rates as it otherwise would
from investments in Senior Loans without any floors until rates
rise to levels above the floors. As a result, the Fund may lose
some of the benefits of incurring leverage. Specifically, if the
Fund's borrowings have floating dividend or interest rates, its
costs of leverage will increase as rates increase. In this
situation, the Fund will experience increased financing costs
without the benefit of receiving higher income. This in turn may
result in the potential for a decrease in the level of income
available for dividends or distributions to be made by the
Fund.
The senior loan market has seen a significant increase in loans
with weaker lender protections including, but not limited to,
limited financial maintenance covenants or, in some cases, no
financial maintenance covenants (i.e., "covenant-lite loans") that
would typically be included in a traditional loan agreement and
general weakening of other restrictive covenants applicable to the
borrower such as limitations on incurrence of additional debt,
restrictions on payments of junior debt or restrictions on
dividends and distributions. Weaker lender protections such as the
absence of financial maintenance covenants in a loan agreement and
the inclusion of "borrower-favorable" terms may impact recovery
values and/or trading levels of senior loans in the future. The
absence of financial maintenance covenants in a loan agreement
generally means that the lender may not be able to declare a
default if financial performance deteriorates. This may hinder the
Fund's ability to reprice credit risk associated with a particular
borrower and reduce the Fund's ability to restructure a problematic
loan and mitigate potential loss. As a result, the Fund's exposure
to losses on investments in senior loans may be increased,
especially during a downturn in the credit cycle or changes in
market or economic conditions.
To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as
a reference interest rate, it is subject to LIBOR Risk. LIBOR has
ceased to be made available as a reference rate and there is no
assurance that any alternative reference rate, including the
Secured Overnight Financing Rate ("SOFR"), will be similar to or
produce the same value or economic equivalence as LIBOR. The
unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in
costs incurred in connection with closing out positions and
entering into new trades. Any potential effects of the transition
away from LIBOR on a fund or on certain instruments in which a fund
invests is difficult to predict and could result in losses to the
fund.
A second lien loan may have a claim on the same collateral pool
as the first lien or it may be secured by a separate set of assets.
Second lien loans are typically secured by a second priority
security interest or lien on specified collateral securing the
borrower's obligation under the interest and present a greater
degree of investment risk. These loans are also subject to the risk
that borrower cash flow and property securing the loan may be
insufficient to meet scheduled payments after giving effect to
those loans with a higher priority. These loans also have greater
price volatility than those loans with a higher priority and may be
less liquid. However, second lien loans often pay interest at
higher rates than first lien loans reflecting such additional
risks.
The Fund intends to terminate on or about August 1, 2027.
Because the assets of the Fund will be liquidated in connection
with the termination, the Fund may be required to sell portfolio
securities when it otherwise would not, including at times when
market conditions are not favorable, which may cause the Fund to
lose money. The Fund is not a "target term" Fund and its primary
objective is to provide high current income. As a result, the Fund
may not return the Fund's initial public offering price of $20.00
per share at its termination.
Investing in securities of non-U.S. issuers, which are generally
denominated in non-U.S. currencies, may involve certain risks not
typically associated with investing in securities of U.S. issuers,
including but not limited to economic risks, political risks, and
currency risks.
Investing in emerging market countries, as compared to foreign
developed markets, involves substantial additional risk due to more
limited information about the issuer and/or the security (including
limited financial and accounting information); higher brokerage
costs; different accounting, auditing and financial reporting
standards; less developed legal systems and thinner trading
markets; the possibility of currency blockages or transfer
restrictions; an emerging market country's dependence on revenue
from particular commodities or international aid; and the risk of
expropriation, nationalization or other adverse political or
economic developments.
Use of leverage can result in additional risk and cost, and can
magnify the effect of any losses.
The Fund's portfolio is subject to credit risk, interest rate
risk, liquidity risk, prepayment risk and reinvestment risk.
Interest rate risk is the risk that fixed-income securities will
decline in value because of changes in market interest rates.
Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments
when due and that the value of a security may decline as a result.
Credit risk may be heightened for the Fund because it invests in
below investment grade securities. Liquidity risk is the risk that
the fund may have difficulty disposing of senior loans if it seeks
to repay debt, pay dividends or expenses, or take advantage of a
new investment opportunity. Prepayment risk is the risk that, upon
a prepayment, the actual outstanding debt on which the Fund derives
interest income will be reduced. The Fund may not be able to
reinvest the proceeds received on terms as favorable as the prepaid
loan. Reinvestment risk is the risk that income from the Fund's
portfolio will decline if the Fund invests the proceeds from
matured, traded or called instruments at market interest rates that
are below the Fund's portfolio's current earnings rate.
The risks of investing in the Fund are spelled out in the
shareholder report and other regulatory filings.
The information presented is not intended to constitute an
investment recommendation for, or advice to, any specific person.
By providing this information, First Trust is not undertaking to
give advice in any fiduciary capacity within the meaning of ERISA,
the Internal Revenue Code or any other regulatory framework.
Financial professionals are responsible for evaluating investment
risks independently and for exercising independent judgment in
determining whether investments are appropriate for their
clients.
The Fund's daily closing New York Stock Exchange price and net
asset value per share as well as other information can be found at
https://www.ftportfolios.com or by calling 1-800-988-5891.
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