While summer travel is in full swing, Hilton Grand Vacations Trust is preparing to issue $301.9 million in asset-backed securities, from a pool made up of timeshare loans that Hilton Resorts or Diamond Resorts originated.
The transaction will issue three classes of notes, plus a $9 million overcollateralization tranche, according to a pre-sale report from Moody's Investors Service.
HGVT 2023-1 will repay investors through a pro-rata structure, where principal payments are allocated on a pro-rata basis, based on the respective senior and subordinate percentages. That is not a direct and immediate flow of payments, however, according to Moody's. Payments to the subordinate notes are subject to performance tests. The deal includes a rapid amortization period, which will trap the once a trigger event is breached.
Also, the trust features a sequential order event, where the transaction will switch to sequential payments from pro-rata principal payments. Grand Vacations Services will service the loans, the rating agency said. Some 10,020 loans are in the pool. On a weighted average (WA) basis the loans have a FICO score of 735, seasoning of 14 months, a remaining term of 105 months, and an annual percentage rate of 15.39%.
HGVT 2023-1 has an extensive group of managers and initial purchasers—Academy Securities, Bank of America Merrill Lynch, Barclays, Deutsche Bank Securities, Mitsubishi UFJ Securities, Wells Fargo Securities, Academy Securities, Citizens Capital Markets, Regions Securities and Truist Securities, according to the rating agency.
Hilton Grand Vacations is the parent of Hilton Resorts, which is sponsoring the transaction. Also, the latter is on the transaction as master servicer, and will unconditionally and irrevocably guarantees that payments due are made punctually. Hilton Grand Vacation is allowed to optionally repurchase defaulted or 90-day delinquent timeshare loans, which increases the transaction's recovery rates and reduces losses in the securities, according to Moody's.
