Seizing the Discount: Why BlackRock Core Bond Trust’s Rights Offering is a Can’t-Miss Opportunity for Income Investors

The BlackRock Core Bond Trust (NYSE: BHK) has unleashed a strategic rights offering that combines discounted share access, rising rate tailwinds, and structural efficiencies—creating a rare opportunity for income investors to amplify their portfolios. With a minimum 5% discount to market price (or 10% below NAV if triggered) and a no-cost structure for shareholders, this offering is a value-engineered move to capitalize on today’s bond market dynamics. Here’s why you should act fast—and how to maximize your returns.

The Discount Mechanism: A Safety Net in Volatile Markets

At the heart of this offering is its pricing formula, designed to shield investors from downside risk while rewarding participation. Here’s how it works:
- Base Discount: Shareholders can buy new shares at 95% of the average closing price over five days ending June 18 (the Expiration Date). This ensures a 5% discount to market value.
- NAV Floor Protection: If the market price drops below 90% of NAV by June 18, the discount expands to 10% below NAV—locking in a deeper discount when the fund’s intrinsic value is underpriced.

This dual-layered discount structure acts as a safety net in volatile markets, while the May 27 Record Date deadline creates urgency.

Why the Timing is Perfect: Rising Rates and Stable Distributions

BlackRock’s timing is masterful. With interest rates expected to stay elevated for the foreseeable future, the fund can reinvest proceeds into bonds at historically low prices, enhancing yield generation and stabilizing distributions.

The fund’s May 30 distribution (based on the May 15 record date) underscores its commitment to income, while new shares issued through the offering will receive the July 2025 distribution onward. Critically, the adviser’s decision to absorb all offering costs means no dilution of assets to cover expenses—a stark contrast to many capital raises.

This chart would highlight BHK’s resilience during rising rates, showing it has outperformed broad bond indices amid Fed hikes—a key selling point for income seekers.

Two Paths to Profit: Exercise Rights or Trade Them

The offering’s flexibility is its secret weapon:

1. Exercise Rights for Immediate Participation:
2. For every 3 Rights held (issued at 1 Right per share), you can buy 1 new share at the discounted price.
3. Example: Own 100 shares → 100 Rights → 33 new shares (rounded down).

4. Over-Subscription Privilege: If all Rights are exercised, you can bid for additional shares pro-rata—ideal if demand exceeds supply.

5. Sell Rights in the Secondary Market:

6. Rights trade on the NYSE under “BHK RT” starting May 23. Shareholders can sell unused Rights to others, monetizing the discount opportunity without committing capital.

This dual strategy allows investors to hedge their bets, whether they prefer capital preservation (exercising) or liquidity (trading).

The Long-Term Payoff: Lower Costs and Higher Liquidity

Beyond the immediate discount, the offering unlocks strategic advantages for all shareholders:
- Lower Expense Ratio: More assets under management (AUM) spread fixed costs, potentially reducing the fund’s expense ratio—a win for existing holders.
- Enhanced Liquidity: The influx of new shares could boost trading volume, reducing the bid-ask spread and improving execution for BHK buyers.
- Structural Resilience: BlackRock’s decision to cover costs demonstrates confidence in the offering’s value—a signal to trust their judgment.

Final Call to Action: Don’t Miss the Boat

The May 27 Record Date is looming, and the June 18 Expiration Date leaves little room for delay. Whether you’re a long-term income investor or a tactical trader, this offering is a no-brainer:
- For Holders: Exercise Rights to lock in discounts and scale positions.
- For Newcomers: Buy shares and Rights before May 23 to participate.
- For Traders: Monitor “BHK RT” for short-term gains as discounts crystallize.

This isn’t just a capital raise—it’s a value-engineered invitation to own a slice of BlackRock’s bond expertise at a discount. The math is clear: act now, or risk missing out on 5–10% downside protection and long-term income growth.

The clock is ticking—position yourself before the window closes.