Priority Income Fund's tender proration falls to 15% as NAV slides

The latest annual tender at Priority Income Fund closed with the lowest proration rate in at least two years: 15.23%. That is the share of tendered stock shareholders got back, and it comes as the nontraded closed-end fund's net asset value has fallen to $3.15 a share, according to The DI Wire. Shareholders tendered 10,184,037 shares, or more than 6.5 times the 1,550,812 the fund offered to buy at NAV. The fund purchased all 1,550,812 shares, setting aside 178 for holders of fewer than 100 shares under its de minimis provision and allocating the rest pro rata. Total spending came to roughly $4.9 million.

Compare the previous annual tender, completed in August 2025: it returned about 43% at a $6.09 NAV. An even earlier 2025 offer returned about 60% at $7.17. The progression traces the fund's NAV collapse: $10.85 in mid-2024, $6.14 a year later, $4.48 at the end of 2025, $3.70 in April 2026. The July tender was priced at $3.15.

Priority blames the broadly syndicated loan market. Elevated defaults and distressed exchanges, it says, have reduced collateral in its CLO equity holdings and squeezed income. The financial statements put the damage in dollars: $178 million of realized investment losses in the fiscal year ended June 30, 2025, and $82.2 million in the six months through December. Total assets have fallen to $479 million from more than $900 million a year earlier. The fund says it is rotating some CLO equity into CLO debt, which it expects to carry lower risk and volatility. That is a risk-off move. It will not restore the lost NAV, and it changes the kind of income behind the fund's distribution.

The arithmetic is simple. The fund capped the offer at 2.5% of shares outstanding, demand ran 6.5 times the cap, and a tendering shareholder gets back roughly one of every six and a half shares. Tender 10,000 shares and this cycle returns about 1,523; last year, at a 43% proration, the same tender would have returned 4,300. The fund deployed about $4.9 million, roughly 1% of the $479 million in assets it reported at year-end 2025. That is a small door.

Distribution policy makes the situation harder to read. As of Dec. 31, 2025, the annualized distribution rate stood at 23.44% of NAV. Fiscal 2025 distributions included $71.5 million characterized as return of capital, against only $11.6 million from earnings. For a fund whose NAV has fallen from $10.85 to $3.15, that yield is not a sign of earnings power; it is cash handed back to holders. Add a buyback capped at 2.5% of shares outstanding, and the fund is paying out capital while rationing liquidity.

Then there is the listing. Priority says it expects to list its common shares on a national exchange before Dec. 31, 2026. Shareholders approved tiered transfer restrictions at the December 2025 annual meeting, capping sales at 25% of a holder's shares. A listing, if it arrives, comes with restrictions that will not produce immediate liquidity.

For shareholders, 15.23% is the number to remember from this tender. Anyone who tendered and was prorated still holds shares in a fund whose NAV keeps falling. The next tender's price will reflect whatever NAV has survived by then. If the loan market keeps deteriorating, this 15.23% may start to look generous.