News Column

Fitch Affirms VMTP Shares Issued by 9 Invesco Closed-End Funds at 'AAA'

May 9, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the 'AAA' ratings on almost $2 billion of Variable Rate Muni Term Preferred Shares (VMTP Shares) issued by nine municipal closed-end funds managed by Invesco Advisers, Inc. (NYSE:IVZ, Invesco). A complete list of the funds and the associated VMTP Shares is provided at the end of this release.

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 Invesco as investment advisor.

FUND PROFILES

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.

FUND LEVERAGE

As of March 31, 2014, effective leverage ratios ranged from 31% to 41%. The funds generally leverage with both tender option bonds (TOBs) and Fitch-rated VMTPs.

ASSET COVERAGE

As of March 31, 2014, each fund's asset coverage ratio for the preferred shares, as calculated in accordance with the 'AAA' Fitch total and net overcollateralization tests (Fitch OC Tests) outlined in Fitch's criteria, was in excess of 100%. This is the minimum threshold required under the terms of the preferred shares.

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.

STRUCTURAL PROTECTIONS

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.

STRESS TESTS

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 ADVISER

Invesco Advisers, Inc., an indirect, wholly owned subsidiary of Invesco Ltd., is the funds' adviser, responsible for the funds' overall investment strategies and their implementation. Invesco Ltd. Had approximately $787.3 billion of assets under management as of March 31, 2014.

RATING SENSITIVITY

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)

$231,000,000 of Series 2015/6-VKI VMTP Shares, due June 1, 2015, at 'AAA';

--Invesco California Value Municipal Income Trust (VCV)

$188,300,000 of Series 2015/6-VCV VMTP Shares, due June 1 2015, at 'AAA';

--Invesco Municipal Opportunity Trust (VMO)

$367,600,000 of Series 2015/6-VMO VMTP Shares, due June 1, 2015, at 'AAA';

--Invesco Municipal Trust (VKQ)

$262,800,000 of Series 2015/12-VKQ VMTP Shares, due Dec. 1, 2015, at 'AAA';

--Invesco Pennsylvania Value Municipal Income Trust (VPV)

$130,100,000 of Series 2015/6-VPV VMTP Shares, due June 1, 2015, at 'AAA';

--Invesco Quality Municipal Income Trust (IQI)

$213,900,000 of Series 2015/12-IQI VMTP Shares, due Dec. 1, 2015, at 'AAA';

--Invesco Trust for Investment Grade Municipals (VGM)

$273,300,000 of Series 2015/6-VGM VMTP Shares, due June 1, 2015, at 'AAA';

--Invesco Trust For Investment Grade New York Municipals (VTN)

$90,400,000 of Series 2015/6-VTN VMTP Shares, due June 1, 2015, at 'AAA';

--Invesco Value Municipal Income Trust (IIM)

$143,100,000 of Series 2015/6-IIM VMTP Shares, due June 1 2015, at 'AAA'.

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 Invesco.

Opt-in to receive Fitch's forthcoming research on closed-end funds:

http://pages.fitchemail.fitchratings.com/FAMCEFBlankOptin/

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Fitch: Minimal Impact on Nuveen CEFs from TIAA Acquisition' (April 15, 2014);

--'Rating Closed-End Fund Debt and Preferred Stock' (Aug. 14, 2013);

--'Global Rating Criteria for Asset-Backed Commercial Paper' (Nov. 8, 2012);

--'Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk' (Oct. 11, 2012);

--'Municipal CEFs Refinance Pre-Crisis ARPS' (May 3, 2012).

Applicable Criteria and Related Research:

Rating Closed-End Fund Debt and Preferred Stock

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716220

Global Rating Criteria for Asset-Backed Commercial Paper

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721566

Municipal Closed-End Funds Diversify Funding and Moderate Rollover Risk

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=691173

Municipal CEFs Refinance Pre-Crisis ARPS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677576

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=829479

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Russ Thomas, +1 312-368-3189

Director

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Ralph R. Aurora, +1 212-908-0528

Senior Director

or

Committee Chairperson

Ian Rasmussen, +1 212-908-0232

Senior Director

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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