John Hancock Funds is restructuring the holdings of 5 of 7 leveraged closed-end funds.

John Hancock, Boston, a unit of Manulife Financial Corp., Boston, says the transactions will affect about $1.6 billion of leverage in the funds.

An outside commercial bank will provide a credit facility to implement the transactions, John Hancock says.

John Hancock says it is making the moves in response to the failures in the market for auction rate preferred securities that have been occurring since February.

The new commercial bank credit facility “will be used to redeem and replace 100% of the outstanding auction rate preferred securities of the 5 taxable equity funds, and to change the form of leverage from ARPS to debt,” the company says in a statement.

The 5 John Hancock closed-end funds affected by the announcement are: Tax-Advantaged Dividend Income, Preferred Income, Preferred Income II, Preferred Income III and Patriot Premium Dividend II.

John Hancock is still working on the refinancing of the Investors Trust and the Income Securities Trust closed-end funds, the company says.

Those funds have about $175 million of ARPS outstanding, the company says.

John Hancock executives say the funds are only moderately leveraged and have asset coverage ratios close to the statutory requirement for debt financing.