U.S. District Court for the Southern District of New York Denies BlackRock’s Motion to Dismiss Saba Capital’s Entrenchment Bylaw Lawsuit

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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