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

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^{Published in Business and Finance on Friday, November 19th 2010 at 12:20 GMT by Market Wire}  

CHICAGO--([ BUSINESS WIRE ])--Fitch Ratings has affirmed the 'AAA' ratings assigned to auction rate preferred shares (ARPS) issued by the following leveraged U.S. taxable income senior loan closed-end fund managed by Invesco Senior Secured Management, LLC (ISSM):

Invesco Van Kampen Senior Income Trust (NYSE: VVR)
--$200,000,000 of series M, T, W, Th & F ARPS with a liquidation preference of $25,000 per share, affirmed at 'AAA'.

The main drivers for the 'AAA' rating affirmations are sufficient asset coverage provided to the ARPS by the trust's underlying portfolios of assets, structural protections afforded by mandatory de-leveraging/cure provisions in the event of asset coverage declines, the legal and regulatory parameters that govern the trust's operations and the capabilities of ISSM as the trust's investment manager.

As of Sept. 30, 2010, VVR's total assets were approximately $1.3 billion and total leverage was approximately $415 million or 33% of total assets, consisting of $200 million in rated ARPS and $215 million drawn against a $300 million revolving line of credit.

As of the Sept. 30, 2010 surveillance report provided to Fitch, the trust'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 trust to deleverage or otherwise cure the violation through portfolio adjustment in a sufficient amount to restore compliance with the applicable asset coverage test(s).

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. Regarding diversification, the fund must adhere to a single industry investment limit of 25% and a single issuer investment limit of 5% for up to 75% of the portfolio. Under normal market conditions the fund pursues its objective by investing at least 80% of its total assets in senior secured loans. As of Sept. 30, 2010, the fund held 96% of its portfolio in senior secured loans.

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 may enter into various interest rate hedging and risk management transactions and may only engage in such transactions for non-speculative purposes. The fund may also invest up to 5% of net assets in structured notes, including credit default swaps for speculative purposes. As of Sept. 30, 2010, the fund had two positions where protection was being sold, by means of loan credit default swaps (CDS), with a total notional amount of $7 million. The CDS exposures, while small, are captured as an additional form of economic leverage in Fitch's coverage tests.

VVR's investment objectives do not pose restrictions with respect to minimum credit quality. However, the fund's governing documents require the fund to maintain asset coverage consistent with an 'AAA' rating stress under Fitch's rating criteria, so significant negative deviations in the portfolio's credit quality would decrease asset coverage and may lead to deleveraging or negative rating action.

As mentioned above, the fund employs leverage in the form of a revolving line of credit, of which $215 million out of a facility limit of $300 million is currently drawn, and $200 million of outstanding ARPS. The fund typically targets leverage in a range of 30-40% of total assets. 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.

ISSM has served as the trust's named investment adviser since Invesco, Ltd's purchase of the Van Kampen fund platform from Morgan Stanley, Inc. in June 2010. Invesco Senior Secured Management, LLC is a direct wholly-owned subsidiary of Invesco, Ltd. (rated 'BBB+', Rating Outlook Stable by Fitch). ISSM has retained the team responsible for VVR's day-to-day management and has 42 professionals with 15 years of average experience exclusively dedicated to its bank loan platform. As of Nov. 9, 2010, parent company Invesco, Ltd. Inc. had approximately $621 billion in assets under management.

The rating may be sensitive to material changes in the credit quality or market risk profile 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 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 sources of information used to assess these ratings were Invesco, Ltd. and the public domain.

Applicable Criteria and Related Research:
--'Closed-End Funds: Evolving Use of Leverage and Derivatives' (Sep. 27, 2010);
--'Closed-End Funds: Redemptions Provide Some Liquidity to Illiquid ARPS Market' (Aug 30. 2010);
--'Closed-End Fund Debt and Preferred Stock Rating Criteria' (Aug. 17, 2009).

Applicable Criteria and Related Research:
Closed-End Funds: Evolving Use of Leverage and Derivatives
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=559525 ]
Closed-End Fund Debt and Preferred Stock Rating Criteria
[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=462492 ]
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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