Wyndham Worldwide is first out the gate this year with a securitization of timeshare loans.
The $300 million Sierra Timeshare 2016-1 Receivables Funding LLC will issue two tranche of notes with a final maturity of March 2033: the $236.69 million senior tranche with credit enhancement of 32.4% has a preliminary ‘A’ rating from Fitch Ratings; the subordinate $63.31 million tranche has credit enhancement of 13.65% and a preliminary ‘BBB’ rating.
Credit enhancement is consistent with that of Wyndham’s previous deal, completed in October 2015, according to Fitch.
The notes are backed by a pool of fixed-rate timeshare loans originated by Wyndham Vacation Resorts (62.6%) and Wyndham Development Corp. (37.4%). Fitch has determined that, on a like-for-like FICO basis, WRDC’s receivables perform better than WVRI’s.
Fitch expects cumulative gross defaults to be 19%; this reflects the collateral pool’s weighted average FICO score of 721, seasoning of approximately 10 months, and a lower concentration of weaker performing WVRI loans. By comparison, Fitch expects losses for the previous deal, which had a slightly weaker collateral pool, to be slightly higher, at 19.15%
The seasoning of the collateral in this transaction is higher in part because the pool includes more loans previously used in securitization that have since been called. Called collateral for 2016-1 makes up 10.2% of the pool, and has a weighted average seasoning of 67 months. The remaining 89.8% of the 2016-1 pool has a three months of seasoning.
Deutsche Bank Securities is the lead underwriter.