Sunterra Corp., which had been a dominant timeshare player prior to filing for bankruptcy in 2000, is hoping to present the ABS market with its first term transaction in almost five years. The deal is scheduled for this month.
"We were waiting to put up a year of post-bankruptcy results [before securitizing]," said. Lillian Liu, vice president of finance at Sunterra. The company emerged from bankruptcy in 2002.
Sunterra's last transaction was a $100 million deal in 1999 via Societe Generale (SG Cowen Securities). The new offering, a 144A led by Merrill Lynch, is forecast between $175 million and $215 million. The collateral is comprised of timeshare-related mortgages originated across the U.S. The company aims to securitize roughly three times every two years going forward, Liu said.
Meanwhile, timeshare ABS may be opening up to some smaller players that had previously found the market inaccessible due to the lack of name recognition, said Gilbert Liu, a partner with law firm Baker & McKenzie. "People are more comfortable with timeshare transactions," he said. "In the past you needed a big name; this is changing as people become more comfortable with the industry and the product we're offering."
At least two new names are floating around. Possible term transactions could come from Silverleaf Resorts, with resorts in Texas, Missouri, Illinois, Georgia and Massachusetts, and Tempus Resorts, a single-site operator in Florida. Moody's Investors Service analyst Andrew Lipton, who worked on a small privately placed deal from Tempus a few years back, said that chatter regarding smaller companies has been growing louder of late.
"For years, these smaller companies have needed liquidity and financing, and accessing the capital markets is obviously key," Lipton said. "It remains to be seen whether or not this will happen. One of the things that would help would be if the monolines decided to get involved with some of these lesser-known companies."
UBS has been trying to get the Silverleaf deal done for years, and while there are rumors of a wrap from Financial Security Assurance, market sources are skeptical.
Of the five timeshare deals to have priced during the past 18 months, the only one to receive a wrap was a $335 million offering from Cendant Corp.'s Sierra Receivables Funding vehicle. The deal closed in May of this year, and was insured by MBIA.
Andrew Yuder, managing director at BB&T Capital Markets, said that while the monolines are likely to pitch Cendant and Marriott, the senior/subordinated structure is the probable route for the lesser-known companies. "There is plenty of appetite for this," Yuder said. "It's an esoteric asset and there isn't much out there. Investors are looking for it."
BB&T is currently shopping a $149.7 million senior/subordinated timeshare offering from Bluegreen Corp. Guidance has the triple-A rated 3.3-year notes pegged at 75 to 80 basis points over swaps.
Sunterra's Liu said that although the company's new issue would likely be a senior/subordinated offering, the wrap option had not been ruled out. "It is certainly something to contemplate," she said.
Reports indicate that the monolines may be thinking about it as well. "We are getting more calls from insurers," Baker & McKenzie's Liu said.
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