OREANDA-NEWS. Fitch Ratings affirms the 'AAA' ratings of the Variable Rate Term Preferred Shares (VRTP Shares) issued by Invesco Dynamic Credit Opportunities Fund (NYSE:VTA), 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 potentially issued 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 Dynamic Credit Opportunities Fund is a diversified, closed-end management investment company. The fund commenced investment operations on June 26, 2007 and is registered under the 1940 Act. The fund's primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation. Under normal market conditions, the fund will invest at least 80% of its net assets in any combination of senior secured floating rate and fixed rate loans, and second lien or other subordinated or unsecured floating rate and fixed rate loans or debt. The fund also may invest up to 20% of its assets in structured products, including collateralized debt and loan obligations.

At the time of the rating affirmation, the portfolio held investments in various asset types including leveraged loans (74%), high yield corporate bonds (16%) and collateralized loan obligations (5%). The remaining balance consisted of cash equivalents, receivables and foreign currency positions. The three largest Fitch industry sectors were represented by computer and electronics, communications (13%); automobiles, building and materials, chemicals (9%); and business services (8%). The portfolio is very diverse in terms of issuer concentration with the largest issuer representing approximately 2.2% of the portfolio.

FUND LEVERAGE
The fund employs leverage in the form of a revolving line of credit, of which $350 million out of a facility limit of $400 million was drawn as of July 31, 2015, and $125 million of VRTP shares. The fund typically targets leverage in a range of 25% - 35% of total assets and as of July 31, 2015, the fund's leverage was at the top end of that range at approximately 33%. 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 overcollateralization 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 Investment Company Act of 1940, 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 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.