d1225945_13d-a.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
SCHEDULE 13D
THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 4)*
 
PIMCO Income Strategy Fund II
(Name of Issuer)
 
Auction–Rate Preferred Shares
(Title of Class of Securities)
 
72201J203
72201J302
72201J401
72201J500
72201J609
(CUSIP Number)
 
Brigade Leveraged Capital Structures Fund Ltd.
c/o Ogier Fiduciary Services (Cayman) Limited
89 Nexus Way
Camana Bay
Grand Cayman KY1-9007
Attention:  Donald E. Morgan, III
 
Copies to:
 
Raymond Gietz, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
 
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
 
September 9, 2011
(Date of Event Which Requires Filing of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is
the subject of this Schedule 13D, and is filing this schedule because of ss.240.13d-1(e), 240.13d-1(f)
or 240.13d-1(g), check the following box [_].
_________
The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
 
*No additional purchases or sales have been made since the date of the reporting persons' last filing.
 

 
 
 

CUSIP No.
72201J203
72201J302
72201J401
72201J500
72201J609
  

1.
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
    
 
 
    
 
Brigade Leveraged Capital Structures Fund Ltd.
    
 
 
    
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
[_]
 
 
(b)
[X]
       
3.
SEC USE ONLY
    
 
 
    
 
 
    
 
 
    
4.
SOURCE OF FUNDS
    
 
 
    
 
WC
    
 
 
    
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
[_]
 
 
    
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
    
 
 
    
 
Cayman Islands
    
 
 
    
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
7.
SOLE VOTING POWER
    
 
 
    
 
0
    
 
 
    
8.
SHARED VOTING POWER
    
 
 
    
 
1,619*
    
 
 
    
9.
SOLE DISPOSITIVE POWER
    
 
 
    
 
0
    
 
 
    
10.
SHARED DISPOSITIVE POWER
    
 
 
    
 
1,619*
    
 
 
    
11.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
 
1,619*
    
 
 
    
12.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
[_]
 
 
    
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
    
 
 
    
 
25.1%**
    
 
 
    
14.
TYPE OF REPORTING PERSON
    
 
 
    
 
CO
    
 
 
    
* Consistent with the Securities and Exchange Commission's Auction Rate Securities Global Exemptive Relief no action letter issued on September 22, 2008, these amounts reflect Brigade Leveraged Capital Structures Fund Ltd.'s combined holdings in the separate series of auction rate preferred shares of the issuer identified by the CUSIP numbers set forth on the cover page of this Schedule 13D Amendment, which are treated herein as one class of securities.
 
** Percentage calculation is based on the number of Issuer's Auction-Rate Preferred Shares outstanding as of January 31, 2011, as reported in the Issuer's Form N-CSR filed on March 30, 2011.
 
 
 
 
 

CUSIP No.
72201J203
72201J302
72201J401
72201J500
72201J609
  

1.
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
    
 
 
    
 
Brigade Capital Management, LLC
    
 
 
    
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
 [_]
 
 
(b)
[X]
       
3.
SEC USE ONLY
    
 
 
    
 
 
    
 
 
    
4.
SOURCE OF FUNDS
    
 
 
    
 
AF
    
 
 
    
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
[_]
 
 
    
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
    
 
 
    
 
Delaware
    
 
 
    
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
7.
SOLE VOTING POWER
    
 
 
    
 
0
    
 
 
    
8.
SHARED VOTING POWER
    
 
 
    
 
1,669*
    
 
 
    
9.
SOLE DISPOSITIVE POWER
    
 
 
    
 
0
    
 
 
    
10.
SHARED DISPOSITIVE POWER
    
 
 
    
 
1,669*
    
 
 
    
11.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
 
1,669*
    
 
 
    
12.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
[_]
 
 
    
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
    
 
 
    
 
25.9%**
    
 
 
    
14.
TYPE OF REPORTING PERSON
    
 
 
    
 
IA
    
 
 
    
* Consistent with the Securities and Exchange Commission's Auction Rate Securities Global Exemptive Relief no action letter issued on September 22, 2008, these amounts reflect Brigade Capital Management, LLC's combined holdings in the separate series of auction rate preferred shares of the issuer identified by the CUSIP numbers set forth on the cover page of this Schedule 13D Amendment, which are treated herein as one class of securities.
 
** Percentage calculation is based on the number of Issuer's Auction-Rate Preferred Shares outstanding as of January 31, 2011, as reported in the Issuer's Form N-CSR filed on March 30, 2011.
 
 
 
 
 

CUSIP No.
72201J203
72201J302
72201J401
72201J500
72201J609
  

1.
NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
    
 
 
    
 
Donald E. Morgan, III
    
 
 
    
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
[_] 
 
 
(b)
[X] 
       
3.
SEC USE ONLY
    
 
 
    
 
 
    
 
 
    
4.
SOURCE OF FUNDS
    
 
 
    
 
AF
    
 
 
    
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
 
[_]
 
 
    
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
    
 
 
    
 
U.S.A.
    
 
 
    
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
7.
SOLE VOTING POWER
    
 
 
    
 
0
    
 
 
    
8.
SHARED VOTING POWER
    
 
 
    
 
1,669*
    
 
 
    
9.
SOLE DISPOSITIVE POWER
    
 
 
    
 
0
    
 
 
    
10.
SHARED DISPOSITIVE POWER
    
 
 
    
 
1,669*
    
 
 
    
11.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
    
 
 
    
 
1,669*
    
 
 
    
12.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
[_]
 
 
    
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
    
 
 
    
 
25.9%**
    
 
 
    
14.
TYPE OF REPORTING PERSON
    
 
 
    
 
IN
    
 
 
    
* Consistent with the Securities and Exchange Commission's Auction Rate Securities Global Exemptive Relief no action letter issued on September 22, 2008, these amounts reflect Donald E. Morgan, III's combined holdings in the separate series of auction rate preferred shares of the issuer identified by the CUSIP numbers set forth on the cover page of this Schedule 13D Amendment, which are treated herein as one class of securities.
 
** Percentage calculation is based on the number of Issuer's Auction-Rate Preferred Shares outstanding as of January 31, 2011, as reported in the Issuer's Form N-CSR filed on March 30, 2011.
 
 
 
 
 

This Amendment No.4 ("Amendment No.4") amends the Schedule 13D first filed with the Securities and Exchange Commission on January 28, 2011, as amended on March 10, 2011, April 29, 2011 and July 15, 2011 (the "Schedule 13D"), and is being filed by Brigade Leveraged Capital Structures Fund Ltd., a Cayman Islands exempted company ("Brigade LCSF"), Brigade Capital Management, LLC, a Delaware limited liability company ("Brigade CM") and Donald E. Morgan, III (each a "Reporting Person" and collectively the "Reporting Persons"), with respect to the Auction-Rate Preferred Shares, par value $.00001 per share ("Shares"), of PIMCO Income Strategy Fund II, a Massachusetts business trust (the "Issuer").  Unless otherwise indicated herein, all capitalized terms used and not defined herein have the respective meanings assigned to them in the Schedule 13D.
 
 
Item 4.
Purpose of Transaction.
 
 
 
Item 4 is supplemented as follows:
 
 
As previously reported, the Reporting Persons believe that in this historically low interest rate environment there are a number of attractive financing alternatives to replace the Shares that the Issuer should be exploring and that would be in the Issuer's best interests.  On July 14, 2011, Brigade CM sent a letter to Mr. Brian Shlissel, the President and Chief Executive Officer of the Issuer, requesting a meeting to discuss Brigade CM's concerns regarding the Shares and to explore these potential financing strategies.  A copy of this letter is attached as Exhibit A to Amendment No.3 to the Schedule 13D, dated as of July 15, 2011 and is incorporated herein by reference.
 
On September 7, 2011, representatives of the Reporting Persons met with Mr. Shlissel and certain other members of the Issuer's management.  At this meeting, the Reporting Persons presented their view that attractive financing alternatives are available to the Issuer to replace the Shares.  In addition, the Reporting Persons expressed concerns (among others) with respect to the Issuer's performance, investment strategy, concentration of investments in financial companies and corporate governance policies and practices.  Representatives of the Issuer's management did not provide substantive responses during the meeting, stating that Regulation FD precluded them from doing so and that they would take the views of the Reporting Persons under advisement.
 
The Reporting Persons believe that the Board is not acting in the best interests of the shareholders of the Issuer (including holders of Shares as well as holders of common shares of the Issuer), and the Reporting Persons intend to, in an effort to seek new and more effective representation on the Board, nominate one person for election to the Board by holders of Shares (voting exclusively as a class) (the "Preferred Shares Trustee") at the Issuer's 2011 annual meeting of shareholders.  The Reporting Persons intend to send a notice to the secretary of the Issuer in accordance with the requirements set forth in the Issuer's fourth amended and restated bylaws and solicit proxies for the election of such nominee as the Preferred Shares Trustee at the Issuer's 2011 annual meeting of shareholders.  In this regard, the Reporting Persons intend to engage in discussions with other shareholders of the Issuer and other relevant parties concerning the business, operations, board composition, management, strategy and future plans of the Issuer.
 
The Reporting Persons evaluate their investment in the Shares and purposes for holding such Shares on an ongoing basis and reserve the right to change their intentions and develop plans or proposals at any time, as they deem appropriate.
 
 
 
Item 6.
Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.
 
 
 
Item 6 is supplemented by the following:
 
The Reporting Persons have entered into a Joint Filing Agreement, a copy of which is attached hereto as Exhibit A.
 
 
   
Item 7.
Material to be Filed as Exhibits.
 
 
 
Exhibit A: Joint Filing Agreement
 
    
 
 

 
 
 

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 
September 9, 2011
 
(Date)
 
 
 
Brigade Leveraged Capital Structures Fund Ltd.
 
 
 
/s/ Donald E. Morgan, III
 
(Signature)
 
 
 
Director
 
(Name/Title)
 
 
 
 
 
Brigade Capital Management, LLC*
 
 
 
By: /s/ Donald E. Morgan, III
 
(Signature)
 
 
 
Managing Member
 
(Name/Title)
 
 
 
/s/ Donald E. Morgan, III*
 
(Signature)


Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (see 18 U.S.C. 1001).

* The Reporting Persons disclaim beneficial ownership in the Shares reported herein except to the extent of their pecuniary interest therein.




 
 
 

Exhibit A
Joint Filing Agreement

Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, each of the undersigned hereby agrees that only one statement containing the information required by Schedule 13D need be filed with respect to the ownership by each of the undersigned of PIMCO Income Strategy Fund II.

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.

 
September 9, 2011
 
(Date)
 
 
 
 
 
Brigade Leveraged Capital Structures Fund Ltd.
 
 
 
/s/ Donald E. Morgan, III
 
(Signature)
 
 
Director
 
(Name/Title)
 
 
 
 
Brigade Capital Management, LLC
 
 
 
By: /s/ Donald E. Morgan, III
 
(Signature)
 
 
 
Managing Member
 
(Name/Title)
 
 
 
/s/ Donald E. Morgan, III
 
(Signature)