For more detail / possible insight into the tender option bond leverage strategy, take a look at Note 2 to the financial statements covering CEF BTA (BLK website).  I'm not an accountant, so I may be missing some nuance, but it seems like a reasonable "replacement" strategy for ARPS in a muni fund. (BTA used TOB from inception - well before the chi-chi began in ARPS.)  Also, a quick look at annual average preferred leverage costs for some Nuveen funds - adjusted for my guesses on the respective timing of reports -- indicated TOBs incur roughly similar leverage costs to ARPS.

Regards, Dick