KEY RATING DRIVERS
The 'AAA' long-term ratings primarily reflect:
--Sufficient asset coverage provided to the preferred shares as calculated per the funds' overcollateralization (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 funds' operations;
--The capabilities of
The funds are closed-end management investment companies regulated by the Investment Company Act of 1940. The funds invest primarily in municipal securities that are rated investment grade by at least one nationally recognized statistical rating organization and that are exempt from federal taxes.
Municipal obligations include municipal bonds, municipal notes, municipal commercial paper and lease obligations. The funds may also may invest up to 20% of its net assets in non-investment-grade and unrated securities that are determined to be of comparable quality.
As of the same date, the funds' asset coverage ratios for total outstanding preferred shares, as calculated in accordance with the Investment Company Act of 1940, was in excess of the minimum asset coverage of 225% required by the funds' governing documents (Preferred Shares Asset Coverage Test).
The funds' effective leverage ratios were below the 45% maximum leverage ratio allowed by the funds' governing documents for the VMTP shares. In the event of breaches to any of the above thresholds, the funds are required to restore compliance per structural protections described below.
Compliance with the Fitch OC, Asset Coverage 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 tests and Asset Coverage tests, the total market value exposure (i.e. valuation, cure and redemption) is approximately 45 business days. For Effective Leverage tests, the exposure period is approximately 10 business days.
In the stress tests performed by Fitch, asset coverage available to the VMTP Shares fell below the 'AAA' threshold, and instead passed at an 'AA' rating level only under scenarios judged to be unlikely, such as an increase to the funds' issuer concentration, while simultaneously migrating the portfolios to 80% 'BBB', 10+ years to maturity bonds and 20% high yield bonds.
Given the highly unlikely nature of the stress scenarios, and the minimal rating impact, Fitch views the funds' permitted investments, municipal issuer diversification framework and mandatory deleveraging mechanisms as consistent with an 'AAA' rating.
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 funds' Preferred Shares Asset Coverage test or Effective Leverage Ratio.
The funds currently do not engage in derivative activities for speculative purposes and do not envision engaging in such activity in the future. Material derivative exposure in the future could have potential negative rating implications if it adversely affects asset coverage available to rated preferred shares.
Fitch has affirmed the following ratings:
--Invesco Advantage Municipal Income Trust II (VKI)
--Invesco Municipal Opportunity Trust (VMO)
--Invesco Municipal Trust (VKQ)
--Invesco Pennsylvania Value Municipal Income Trust (VPV)
--Invesco Quality Municipal Income Trust (IQI)
--Invesco Trust for Investment Grade Municipals (VGM)
--Invesco Trust For Investment Grade New York Municipals (VTN)
--Invesco Value Municipal Income Trust (IIM)
For additional information about Fitch 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'.
The sources of information used to assess this rating were the public domain and
Opt-in to receive Fitch's forthcoming research on closed-end funds:
Additional information is available at 'www.fitchratings.com'.
--'Fitch: Minimal Impact on Nuveen CEFs from TIAA Acquisition' (
--'Rating Closed-End Fund Debt and Preferred Stock' (
--'Global Rating Criteria for Asset-Backed Commercial Paper' (
--'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk' (
--'Municipal CEFs Refinance Pre-Crisis ARPS' (
Rating Closed-End Fund Debt and Preferred Stock
Global Rating Criteria for Asset-Backed Commercial Paper
Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk
Municipal CEFs Refinance Pre-Crisis ARPS
Source: Fitch Ratings
Most Popular Stories
- National Retail Federation Reduces Sales Forecast
- Long-term Strengths Emerge in U.S. Economy
- Honda' s Accord Plug-in Hybrid Is a Fuel Miser
- Xavier Gutierrez Appointed to Bank Board
- Amazon Fire Phone Improves on Familiar: Review
- Self-Induced Abortions Rise After Texas Closes Clinics
- Naya Rivera and Ryan Dorsey Are Married
- Comic-Con Festival Kicks Off in San Diego
- Marco Rubio Swings Back to the Right
- Social Media Startups That Pay You to Post