EATON VANCE SENIOR FLOATING-RATE TRUST
Fitch Ratings has affirmed the 'A' long-term ratings assigned to the auction preferred shares (APS) issued by
The funds are managed by
RATING ACTIONS
Entity / Debt
Rating
Prior
27828H204
LT
A
Affirmed
A
27828H303
LT
A
Affirmed
A
27828H402
LT
A
Affirmed
A
27828H501
LT
A
Affirmed
A
27828H600
LT
A
Affirmed
A
27828Q204
LT
A
Affirmed
A
27828Q303
LT
A
Affirmed
A
27828Q402
LT
A
Affirmed
A
Page
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
The ratings are supported by:
Suf?cient asset coverage relative to Fitch's published criteria;
Sufficient asset coverage provided to the preferred shares as calculated per the fund's overcollateralization (OC) tests;
The structural protections afforded by mandatory deleveraging provisions in the event of asset coverage declines;
The legal and regulatory parameters that govern the funds' operations;
The capabilities of
Fitch's ratings on APS speak only to timely repayment of interest and principal in accordance with the governing documents and not to potential liquidity in the secondary market.
FUND PROFILES
EFR is a diversi?ed, closed-end management investment company registered under the Investment Company Act of 1940, as amended, that commenced operations in
EVV is a non-diversi?ed, closed-end management investment company, registered under the Investment Company Act of 1940, as amended. The fund commenced operations in
The funds invest in foreign currency-denominated securities and utilize forward foreign currency exchange contracts to hedge the potential exchange rate risk associated with such investments. Fitch notes that for unhedged positions, exchange rate risk is included as part of Fitch's assessment of the suf?ciency of asset coverage available to rated APS. EVV also used derivatives such as interest rate futures to manage exposure to interest rate risk and credit default swaps to gain certain credit exposures.
LEVERAGE
As of
As of the review date, the effective leverage level for the EFR and EVV funds were 36% and 31%, respectively. Effective leverage is a ratio measuring a fund's structural leverage as a percentage of its capital structure.
SUBORDIINATIOIN RISK AND REFINANCING RISK
Although the bank credit facilities and Fitch-rated APS utilized by both funds create a degree of subordination risk for the funds' preferred share investor, Fitch believes the risk is manageable. The rights of these creditors to receive payments of principal and interest are fully secured by the collateral of the applicable fund and are senior to the rights of holders of the rated preferred shares to receive dividends and other distributions, and upon liquidation. Fitch's net OC test quantifies subordination risk by assessing asset coverage to the rated obligations after first repaying liabilities that are senior in the capital structure. Both EFR and EVV have Fitch net OC test results in excess of 100% at the assigned rating level.
APS dividends are cumulative in nature, disclosed to the purchasers as such, and any accrued but unpaid cumulative dividends would be captured in Fitch's net OC test calculation.
Fitch believes there is minimal refinancing risk associated with the preferred shares of EFR and EVV. The Fitch net OC test results indicate the funds are sufficiently liquid to fully repay all of their leverage within a relatively brief 45- to 60-day exposure period.
DERIVATIVES
As of the review date, both EVV and EFR utilizes various interest rate derivatives to manage the duration of its portfolio and to hedge against fluctuations in securities prices due to interest rates.
ASSET COVERAGE
As of the review date, the funds' asset coverage ratios for the APS, as calculated in accordance with the Investment Company Act of 1940, were in excess of the minimum asset coverage of 200% required by the funds' governing documents.
As of the review date, each fund's asset coverage ratios, as calculated in accordance with Fitch OC tests per the 'A' rating guidelines, were in excess of 100%.
STRUCTURAL PROTECTIONS
Compliance with the asset coverage requirements are tested periodically. A breach of the asset coverage threshold requires the fund to redeem sufficient preferred shares to restore compliance.
For the asset coverage ratio test, the total market value exposure periods (i.e. the pre-speci?ed time period allotted for valuation, cure and redemption in the event of a breach) are within the 40-60 business day Fitch criteria guidelines.
INVESTMENT MANAGER
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Rating upgrades are not currently envisioned for the funds as the funds invest largely in securities that are ineligible for credit at the 'AA' rating level.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The ratings may be sensitive to material changes in the leverage composition, portfolio credit quality or market risk of the funds' assets, as described above. A material adverse deviation from Fitch guidelines for any key rating driver could cause Fitch to downgrade the ratings;
The ratings could be downgraded if asset coverage cushions erode as a result of market volatility, or if Fitch believes the assets the funds invest in are unlikely to retain suf?cient liquidity and price stability at the current rating level;
The funds have the ability to assume economic leverage through derivative transactions that may not be captured by the minimum asset coverage test or effective leverage ratio. The funds do not currently engage in speculative derivative activity. Material derivative exposures in the future could have potential negative rating implications if they adversely affect asset coverage available to rated preferred shares;
Transaction documents reference Fitch's rating criteria that was published in
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on www.fitchratings.com
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