Hilton Grand Corp. (HRC) is approaching the securitization market with a $400 million transaction securitizing a fixed-rate pool of timeshare loans originated by HRC and two subsidiaries, offering investors bonds backed by strong if moderately deteriorating collateral.
Led by BofA Securities, the deal comprises three classes of notes: a $210 million piece rated AAA; $125 million rated single-A; and a $65 million portion rated BBB. The tranches respectively carry credit enhancement of 56.5%, 26.5% and 11.0%, according to Fitch Ratings.
Besides the timeshare loans originated by HRC, the deal includes those originated by Diamond Resorts Corp. and Bluegreen Vacations, subsidiaries respectively acquired fully by HRC in August 2021 and January 2024.
Fitch pointed to the Hilton Grand Vacations Trust (HGVT) 2025-2 transaction's strong collateral, which holds a weighted average FICO credit score of 742.
In addition, according to Fitch's July 31 presale report, "Loans with original balances greater than $100,000 have decreased to 20.3% from 23.2% in 2025-1, which is considered a credit positive, as larger-balance loans have led to higher cumulative gross defaults in prior HGVT transactions."
Nevertheless, there are signs of credit deterioration. The current deal's FICO score of 742 is down somewhat from the 745 score of HGVT's first transaction earlier this year, and from 749 in HGVT's final 2024 deal.
"Borrowers with FICO scores greater than or equal to 700 represent 75.5% of the pool, down
from 78.7%" in HGVT's first ABS deal this year, Fitch said. "Borrowers with scores lower than 650 represent 8.3% of the pool, up from 6.2%" in the first deal.
In addition, Fitch noted that it anticipates asset performance for timeshare ABS overall to "weaken slightly" in 2025, with continued increases in delinquencies, which in 2023 and 2024 rose sharply toward pre-pandemic levels.
"This is expected to continue in 2025 on lower overall economic growth and moderately higher unemployment," Fitch said, adding that "further negative results in timeshare ABS performance could stem from the effect of slower economic growth, moderately higher unemployment and inflationary pressures on weaker consumers' prioritization of payments due to the high correlation of such factors with travel and tourism."
