3 Eaton Vance funds to redeem auction-rate shares

BOSTON, April 23 (Reuters) - Money manager Eaton Vance Corp (EV.N: Quote, Profile, Research) said on Wednesday that three of its municipal bond funds would redeem $580 million of outstanding auction preferred shares as liquidity is drying up in wake of the deepening credit crisis.

This is the second time this month that Eaton Vance has announced such a move. Two weeks ago, the company said four of its closed-end funds would collectively redeem about $1.1 billion of auction-rate preferred shares.

Auction-rate securities are long-term bonds that behave like short-term debt and have long been popular with conservative investors because of their tax-exempt status.

They are often issued by municipalities, and their interest rates are often reset frequently. Recently, however, the auctions failed to find much interest, forcing companies like Eaton Vance and other closed-end fund issuers like Nuveen Investments and BlackRock Inc (BLK.N: Quote, Profile, Research) to find ways to redeem them.

Boston-based Eaton Vance said three closed-end muni bond funds, managed by its Eaton Vance Management affiliate, would spend $25,0000 a share plus the amount of accumulated but unpaid dividends to redeem the shares.

The company, the third-largest U.S. player in the closed-end fund market, said the Eaton Vance Insured Municipal Bond Fund EIM would redeem about 65 percent of its outstanding auction preferred shares. The Eaton Vance Insured California Municipal Bond Fund EVM plans to redeem about 55 percent, and the Eaton Vance Insured New York Bond Fund ENX, about 63 percent.

Eaton Vance said the financing was being provided through tender option bonds. (Reporting by Svea Herbst-Bayliss; Editing by Lisa Von Ahn)