Herzfeld Credit Income Fund (HERZ): 71% Tendered for a 5% Offer

The result: 1,441,647 asked, 100,886 bought

The offer was filed on September 17, 2026 as a Schedule TO-I (EDGAR indexes it under the form type SC 13E3, but the filing itself ticks the box for an issuer tender offer under Rule 13e-4). It ran until 5:00 p.m. Eastern on October 15, 2026. The terms were simple: cash for up to 5% of the shares, "97.5% of the most recently determined net asset value per share" as of the expiry, and if more shares came in, a pro rata purchase. The fund said it would pay from cash on hand, then sales of portfolio securities, and "will not borrow money".

The price of $18.2033 is 97.5% of the NAV the fund used, which works out to $18.67 per share (our arithmetic: $18.2033 divided by 0.975). The fund determines NAV at least monthly, on the last business day, so the NAV used for an October 15 expiry is most likely the one struck at September 30; the filings do not say which date. The fund's estimate before the offer, assuming August NAV of $19.13, was a total cost of $1,881,528.56 for 5% of the shares. The 2.5% haircut is kept by the fund "to help defray certain costs of the tender". Whoever tendered receives cash "as promptly as practicable" after the expiry; holders whose shares are not accepted for payment by November 13, 2026 can withdraw them.

The worked example (our arithmetic)

A pro-ration factor of 6.99895% means the fund bought that share of every holder's tendered shares. For a holder who tendered 1,000 shares:

Two points follow from the arithmetic and not from any recommendation. First, the fund said it purchases "on a pro rata basis (disregarding fractional shares)", so a holder cannot choose how many shares are bought; the factor is set by everyone else's requests. Second, the shares that come back are the ones that were not bought, and they are worth whatever the market pays for them: at the October 7 price, 930 shares were worth about $13,850 (our arithmetic), not $18.20 each. The market price on the expiry date is not in any filing we read, so the $1,042 line is an illustration at the last price we can source, not a result.

The tender is also a taxable event. The offer document says that "it will be a taxable transaction either in the form of a 'sale or exchange' or, under certain circumstances, a 'dividend'"; our page on wash sales around REIT, BDC and fund tenders covers one part of that.

Why a 5% offer drew 71%: the price gap

Before the offer there were 2,021,875 shares outstanding (the 1,920,989 after the offer plus the 100,886 bought, which matches the September 30 count in the 13D/A filings). The 1,441,647 tendered are 71.3% of them (our arithmetic), 14.3 times the offer. The reason is on the fund's own fact sheets: the market price sat well under the 97.5% of NAV the fund was offering.

At August 31, the tender price would have been 16.8% above the market price (our arithmetic: $18.65 against $15.975). By the October 7 sales at $14.8913, the premium of the tender price over the market was 22.2%. Requests came in at 14 times the offer.

The audited year-end figures tell the same story with less noise. At June 30, 2026 NAV was $19.51 and the market price $17.20; "the discount to NAV widened from -4.59% to -11.84%" over the fiscal year. The fund's total return based on NAV was -0.20% and based on market value -8.34%. The offer document gives the stated purpose: "to provide Shareholders with a liquidity event and the opportunity to realize a price that is closer to the Fund's underlying portfolio value per Share than recent market prices per Share".

Four tenders, four oversubscriptions

The fund has done this before, under its earlier name, The Herzfeld Caribbean Basin Fund (ticker CUBA). Share counts for the first three are before the 1-for-10 reverse split of February 2026; the percentages are not affected.

In the second to fourth tenders, requests were 14.1, 13.7 and 14.3 times the offer (our arithmetic). Something close to 70% of the shares have been put up for tender every time, whatever the price or the share count. The offer of October 2025 was the first under the credit strategy. The fund's own table puts the September 2025 quarter between a 1.88% premium and a 12.12% discount, so the queue did not need a wide discount to form.

The 2026 share count is higher than the split-adjusted count after the 2025 tender (1,606,322) because a year-end capital gains distribution of $0.6867 per share (pre-split) declared on November 10, 2025 was paid largely in new shares: 3,420,452 shares were issued in the six months to December 31, 2025 (pre-split), and 403,695 split-adjusted shares for the fiscal year. Total distributions for fiscal 2026 were $7.38 per share (post-split), of which $6.87 was realized gains; the fund declared $0.17 per share for each of July and August 2026.

The 13D/A filings: the adviser's own group, not an outsider

Four Schedule 13D/A filings (September 28, September 30 and two on October 8) were flagged as pointing to an activist. Read in full, they are the opposite. They are filed by two individuals tied to the fund's adviser, Thomas J. Herzfeld Advisors, Inc. (one signs as President, the other as Chairman), each "et al." for the adviser's advisory-client accounts, both reporting on the fund's one class of common stock:

The two groups overlap: both include the same advisory accounts (618,620 shares with shared voting and dispositive power on October 6), and the second also includes shares held individually by its filer. The filings say that "no owner of an Account holds more than 5%". What changed between the filings is selling: the advisory clients sold 96,974 shares in the open market between September 17 and October 7 at an average of about $15.26, and 55,740 of them on October 6 and 7 alone at about $14.97 (our arithmetic from the trade lists).

Two things follow, and one does not. The adviser group, not outside holders, is the largest holder, at roughly a third to two fifths of the fund. If the October 6 figure for the larger group (820,755 shares) still held on October 15, only 1,201,120 shares were held outside it, fewer than the 1,441,647 tendered, so at least 240,527 tendered shares would have come from the group's accounts and insiders (our arithmetic; sales after October 7 would change this, and the filings do not say who tendered). What the filings do not show is why the accounts sold in the market at about $15 days before an offer at $18.20.

A separate Schedule 13G, filed October 20, 2026 by CSS LLC (an Illinois company with a Chicago address), reports 110,800 shares, 5.49% of the 2,017,725 shares, with an event date of October 7, 2026, under Rule 13d-1(c), the passive-investor route. The filings do not say whether those shares were tendered. Under Rule 14e-4, as the offer document reminds holders, a person may not tender in a partial offer unless they have "a net long position equal to or greater than the amount tendered".

What the fund owns

The fund used to be a Caribbean-basin equity fund. Effective July 1, 2025 its objective changed to total return with a secondary objective of high current income, investing in "equity and junior debt tranches of collateralized loan obligations". The holdings at the latest two dates:

At June 30, 2026 net assets were $39,213,808 on 2,010,017 shares, there was no borrowing on the balance sheet, and total expenses were $1,812,915 on $3,238,668 of investment income; the expense ratio to average net assets was 4.33%, up from 3.57% a year earlier, with $122,457 of tender offer fees among the costs. The adviser's fee is 1.25% of managed assets plus an incentive fee. A holder of this fund is mostly a holder of other closed-end funds, with their own discounts and fees (our reading of the holdings table, not a fee calculation).

Timeline

What a reader can do with this

• If you tendered: about 7 of every 100 shares you tendered were bought at $18.2033, and the rest are still yours, in the same account, at whatever the market pays. The fund said it would pay "as promptly as practicable"; the 1099-B or brokerage statement will show the sale.
• If you hold and did not tender: the fund is about 5% smaller and your share of it about 5% larger. Buying at 97.5% of NAV adds roughly $0.02 per remaining share (our arithmetic: 100,886 shares times $0.47 below NAV, divided by 1,920,989). The cost is a smaller fund with a higher expense ratio, which the offer document itself flags.
• If you are looking at the ticker: HERZ is the Herzfeld fund. It is not Hertz Global (ticker HTZ). Prices before February 9, 2026 are about one tenth of today's because of the reverse split, so a chart or an old quote page can look like a collapse or a bargain when it is the split.
• What the plan means for next year: the board's plan is stated to run to June 30, 2027. Whether another tender follows in autumn 2027 depends on the plan being extended or on the average discount test; the filings we read do not say.
• What would change the picture: a market price closer to NAV (the tender is then worth little), a larger offer than 5%, or another set of 13D/A filings showing the adviser group's share moving.

Related reading: our guide to how tender offers work and how many SC TO-I filings there are, the October 2026 BDC tender results and the private credit redemptions tracker, which cover the non-traded funds where proration works the same way but nobody can sell on an exchange.

FAQ

All figures are from the fund's filings on EDGAR (CIK 880406), read on October 20 and 21, 2026: Schedule TO-C of September 11, Schedule TO-I of September 17 with its Offer to Purchase, Amendments No. 1 and No. 2 (final) of October 19 and 20, the earlier final amendments of March 25, 2024, November 21, 2024 and October 21, 2025, the N-CSR of September 4, 2026, the N-CSRS of March 5, 2026, the monthly Form 497AD fact sheets (transcribed from the images attached to each filing), the Schedule 13D/A filings of September 28, September 30 and October 8, 2026 and the Schedule 13G of October 20, 2026. Percentages tendered, the worked example, the price gap, trade totals and the effect on NAV are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.