OREANDA-NEWS. Fitch Ratings has affirmed the 'AAA' ratings for the Variable Rate Term Preferred Shares (VRTP Shares) issued by Invesco Senior Income Trust (NYSE:VVR), a closed-end fund managed by Invesco Advisers, Inc.:

--$125,000,000 of VRTP shares, due September 2017, with a liquidation preference of $100,000 per share in series C-1, C-2, C-3, C-4 and L-1.

KEY RATING DRIVERS

The 'AAA' rating affirmation reflects:

--Sufficient asset coverage provided to the VRTP shares as calculated per the fund's over-collateralization (OC) tests;
--The structural protections afforded by mandatory collateral maintenance and de-leveraging provisions in the event of asset coverage declines;
--The legal and regulatory parameters that govern the fund's operations;
--The capabilities of Invesco Advisers, Inc. as fund adviser.

FUND PROFILE

Invesco Senior Income Trust is a diversified, closed-end management investment company. The fund commenced investment operations on June 23, 1998 and is registered under the 1940 Act. The fund's investment objective is to provide a high level of current income, consistent with preservation of capital. Under normal market conditions the fund pursues its objective by investing at least 80% of its total assets in senior secured loans. As of Oct. 9, 2015, the fund held approximately 92% of its portfolio in senior secured loans. Regarding diversification, the fund's governing documents require that the fund adhere to a single industry investment limit of 25% and a single issuer investment limit of 5% for up to 75% of the portfolio.

The fund may also invest up to 20% of the fund's net assets in unsecured loans and may acquire warrants, equity securities and junior debt securities in conjunction with its investments in senior loans. Regarding the use of derivatives, the fund is permitted by its investment guidelines to enter into interest rate hedging and risk management transactions for hedging purposes and may also invest up to 10% of net assets in structured notes, including credit default swaps (CDS), for speculative purposes. As of Oct. 9, 2015, the fund had no derivative positions.

The fund does not adhere to explicit minimum credit quality guidelines, although material negative credit migration would result in the fund breaching its asset coverage ratios and therefore require the fund to rebalance the portfolio or deleverage to restore appropriate asset coverage.

FUND LEVERAGE

The fund employs leverage in the form of a revolving line of credit, of which $267 million out of a facility limit of $350 million was drawn as of Oct. 9, 2015, and $125 million of VRTP Shares. The fund typically targets leverage in a range of 25%-35% of total assets and as of Oct. 9, 2015, the leverage amount was 32%. The bank line is secured by a general senior first claim on the fund's assets, which is reflected in Fitch's OC and Net OC calculations. The VRTP Shares are subordinate to the line of credit and senior to the fund's outstanding common shares.

ASSET COVERAGE

The fund's asset coverage ratio, as calculated in accordance with the Fitch total, and net OC tests (Fitch OC Tests) per the 'AAA' rating guidelines outlined in Fitch's applicable criteria, were in excess of 100%. This is the minimum threshold required under the terms of the VRTP shares.

The test calculates standardized asset coverage by applying haircuts to portfolio holdings based on perceived riskiness and diversification of the assets and measuring its ability to cover both on- and off-balance-sheet liabilities, if any, at the assigned 'AAA' stress level.

The fund's asset coverage ratio for the VRTP Shares, as calculated in accordance with the 1940 Act, was in excess of the minimum asset coverage threshold of 225% required by the fund's governing documents (Preferred Shares Asset Coverage Test).

The fund has covenanted to maintain the effective leverage ratio (Effective Leverage Test) for the VMTP Shares at or below 45% of total assets. The fund's Effective Leverage Ratio is currently below 45% as noted above.

In the event of breaches to any of the above thresholds, the fund is required to restore compliance per structural protections described below.

STRUCTURAL PROTECTIONS

Compliance with the Fitch OC, Preferred Shares Asset Coverage Test and Effective Leverage thresholds is tested periodically. The fund manager is expected to cure any breach by altering the composition of the portfolio toward assets with lower discount factors (for Fitch OC breaches), or by reducing leverage in a sufficient amount (for all other breaches) within a pre-specified time period.

For Fitch OC, Asset Coverage and Effective Leverage Tests, the maximum market value exposure (i.e. valuation, cure and redemption) that preferred shareholders would be exposed to before cure or redemption is approximately 55 business days.

THE FUND'S ADVISER

Invesco Advisers, Inc., an indirect, wholly owned subsidiary of Invesco, Ltd., is the fund's adviser, responsible for the fund's overall investment strategy and its implementation. Invesco Ltd. had approximately $806.7 billion of assets under management as of July 31, 2015.

RATING SENSITIVITIES

The ratings assigned to the preferred shares may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the funds, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause ratings to be lowered by Fitch. The funds have the ability to assume economic leverage through derivative transactions which may not be captured by the fund's Preferred Shares Asset Coverage test.