Marriot Vacations Worldwide plans to issue $250 million of notes backed by timeshare loans.
The deal, MVW Owner Trust 2016-1, is the company’s eighteenth term securitization. It features two tranches of notes; a $230.57 million tranche of class A notes carry a preliminary ‘A’ rating from Fitch Ratings and benefit from hard credit enhancement of 11.50%; a $19.43 million tranche of class B notes are rated ‘BBB’ and benefit from 4% hard credit enhancement.
All of the notes have a final maturity of December 2033.
Credit Suisse is the structuring manager.
The collateral consists of fixed-rate timeshare loans originated by Marriot Ownership Resorts, a subsidiary of Marriot Vacations Worldwide. Marriot Ownership Resorts is also the main servicer of the transaction, with Wells Fargo acting as the backup servicer.
According to Fitch, the credit quality of obligors in the latest deal has improved; the borrowers have a weighted average credit score of 737, u[ 11 points higher than the prior transaction, and the highest score since 2009-2. In fact, the credit quality is closer in comparison to Marriott’s 2007-2009 transactions.
However the weighted average seasons has decreased, while the concentartion of foreign obligors has increased. The loans in 2016-1 are seasoned just 18 months, down from 42 months in the 2015-1 transaction. The foreign obligor concentration has risen to 16.7% from 12.2%. The rating agency attributes this increase to the decline of domestic timeshare loan originations in the U.S. wake of the recession. In its presale report, it says that foreign borrower, particularly those in Latin America, present additional risks.
As with the prior MVWOT transactions, 2016-1 features a prefunding account that will hold up to 20% of the initial note balance after the closing date to purchase eligible timeshare loans. It also allows for the sponsor to substitute up to 15% of the pool balance with higher quality loans.
