The next timeshare-loan securitization for Marriott Vacations Worldwide (NYSE: VAC) will include, for the first time, newly acquired properties that are marketed under the Sheraton and Westin brand.
According to presale reports, the pool of loans for MVW’s various properties (with a remaining principal balance of $373.2 million) include a 9% share of Sheraton assets and 10% Westin. Both brands were taken over in Marriott Vacation’s buyout of Vista Signature Experiences (VSE) completed last September, as VSE licenses the Sheraton and Westin vacation-ownership brands.
The inclusion of the new brands brings mixed results into the pool, since Sheraton’s properties tend to have greater defaults than those associated with the Orlando, Fla.-based MVW – but the borrowers under the Westin brand performed better in 2018, according to Fitch Ratings.
The overall transaction includes 100 properties involving 600,000 owners in the U.S. and nine other countries.
The loans will support $450 million in Class A, B and C notes, which have an initial credit enhancement of 24.35%. The Class A notes, totaling $349.7 million, have preliminary AAA ratings from Fitch and S&P Global Ratings.
The collateral pool consists of 14,244 prime loans with an average principal balance of $26,240. The weighted average coupon is 12.78%, with average remaining terms of 124 months. Borrowers have a WA FICO of 737, and have a WA current equity of 18.74% in the properties.
MVW will include a prefunding amount of 20% (or an estimated $91.8 million) of the initial note balances, to purchase additional collateral for the deal until Oct. 31. That’s down from 25% in 2018-1.
S&P’s expected gross default assumption for domestic borrowers is 8.95%; combined with foreign obligors, it is 9.71%. Fitch has a base case loss proxy of 11.75%.
Marriott Vacations Worldwide was spun off from Marriott International in 2011. Since then it has acquired other vacation timeshare properties including Aqua-Aston Hospitality, Hyatt Vacation Ownership and VSE. It develops, markets, sells and manages vacation ownership for various brands: Marriott Vacation Club and Marriott Vacation Club Pulse, Grand Residences by Marriott, Sheraton, Westin and Hyatt Resident Club.
The deal, arranged by Wells Fargo, is expected to close May 23.
