Fitch Affirms Pfd Stock 'AAA' Ratings for Invesco Van Kampen Senior Income Trust

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the 'AAA' rating of the following auction rate preferred shares (ARPS) issued by Invesco Van Kampen Senior Income Trust (NYSE:VVR), a senior loan closed-end fund managed by Invesco Senior Secured Management, LLC (ISSM):

--$200,000,000 of series M, T, W, Th, & F ARPS with a liquidation preference of $25,000 per share.

KEY RATING DRIVERS

The 'AAA' rating primarily reflects:

--Sufficient asset coverage provided to the ARPS as calculated per the fund's over-collateralization (OC) tests.

--The structural protections afforded by mandatory de-leveraging provisions in the event of asset coverage declines.

--The legal and regulatory parameters that govern the fund's operations.

--The capabilities of ISSM as investment manager.

ASSET COVERAGE

As of the Oct. 31, 2011 surveillance report provided to Fitch, the fund's asset coverage ratios for total outstanding ARPS, as calculated per Fitch's updated criteria as the Fitch overcollateralization (OC) and the Fitch Net OC tests were in excess of 100% for an 'AAA' rating level. As of the same date, the trust's asset coverage ratios for total outstanding senior debt and total outstanding ARPS, as calculated in accordance with the Investment Company Act of 1940 (1940 Act), were in excess of 300% and 200%, respectively.

Should any of the asset coverage tests mentioned above decline below their minimum threshold amounts and not be cured within the pre-specified timeframe (25 business days for the Fitch tests), the governing documents require the fund to deleverage or otherwise cure the violation through portfolio adjustment in a sufficient amount to restore compliance with the applicable asset coverage test(s).

FUND PROFILE

Invesco Van Kampen 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. 31, 2011, the fund held 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 5% of net assets in structured notes, including credit default swaps (CDS), for speculative purposes. As of Oct. 31, 2011, the fund had one loan CDS position where protection was being sold with a total notional amount of $5 million, or 0.004% of the portfolio. The CDS exposure, while small, is captured as an additional form of economic leverage in Fitch's coverage tests.

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. As of Oct. 31, 2011, the average credit quality of the portfolio was 'B+', with 19% of the portfolio either unrated or rated 'CCC' or lower.

The fund employs leverage in the form of a revolving line of credit, of which $132 million out of a facility limit of $300 million was drawn as of Oct. 31, 2011, and $200 million of outstanding ARPS. The fund typically targets leverage in a range of 30-40% of total assets and as of Oct. 31, 2011, the leverage amount was 28%. 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 ARPS are subordinate to the line of credit and senior to the fund's outstanding common shares.

THE ADVISOR

The fund's investment adviser was acquired by Invesco, Ltd (rated 'A-', Outlook Stable by Fitch) as part of the June 2010 acquisition of the Van Kampen fund platform from Morgan Stanley, Inc. Invesco Senior Secured Management, LLC is a direct wholly-owned subsidiary of Invesco, Ltd. ISSM has retained the team responsible for the fund's day-to-day management and has 42 professionals with 15 years of average experience exclusively dedicated to its bank loan platform. As of June 30, 2011, Invesco, Ltd. Inc. had approximately $654 billion in assets under management.

RATINGS SENSITIVITY

The rating assigned to the ARPS may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered by Fitch.

For additional information about Fitch's rating guidelines applicable to debt and preferred stock issued by closed-end funds, please review the criteria referenced below, which can be found on Fitch's web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

The sources of information used to assess this rating were the public domain and ISSM.

Applicable Criteria and Related Research:

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 16, 2011);

--'Closed-End Fund: Evolving Use of Leverage and Derivatives' (Sept. 27, 2010);

--'Closed-End Fund: Redemptions Provide Some Liquidity to Illiquid ARPS Market' (Aug. 31, 2010).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648840

Closed-End Funds: Evolving Use of Leverage and Derivatives

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=559525

Closed-End Funds: Redemptions Provide Some Liquidity to Illiquid ARPS Market

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=552106

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