Timeshare operator Orange Lake Country Club priced a $148.76 million timeshare loan securitization wide of levels paid by Wyndham Worldwide, the latest timeshare operator to come to market.
Orange Lake Timeshare Trust 2014-A marks a return for an issuer that was last in the market in 2014. The 3.08-year, AAA’-rated class A notes priced at swaps plus 119 basis points, 24 basis points wide of Wyndham’s July timeshare securitization, according to a Reuters report.
At the subordinate levels the Orange Lake BBB’-rated class B notes priced at 194 basis points, 64 basis points wide of where the B notes printed on the Wyndham deal.
Wyndham is a more seasoned issuer in the securitization market, its July transaction was the timeshare operator’s 25th transaction.
Orange Lake Timeshare Trust 2014-A however is only the third securitization for Orange Lake. The deal is backed by a pool of 11,407 fixed-rate timeshare loans. Bank of America Merrill Lynch is the lead underwriter. Fitch Ratings assigned preliminary ratings to the deal.
Compared with its previous deal. Orange Lake Timeshare Trust 2014-A has, on average, loans with larger balances: $14,299, compared with $12,207 in the 2012-A transaction. The primary drivers of this increase are the increase in the price of a timeshare since the loans in 2012-A were originated, according to Fitch.
The weighted average FICO score of OLTT 2014-A is 732, down slightly from 735 in 2012-A, but up from 652 in the company's 2006 transaction. However, the 2014-A pool contains 8.5% loans with a FICO score less than 650, which were excluded from 2012-A.
The 2014-A pool also has 19 months of seasoning and an upgrade concentration of 53%, the highest to date, according to Fitch's presale report. Upgrades are loans to borrowers who trade their property in for another with a higher value. Orange Lake buys back the timeshare interest on the original property and the borrower's existing equity is applied toward the new purchase price.
Orange Lake Country Club has issued two prior deals. The first transaction, OLTT 2006-A, paid in full earlier this year with 22.74% cumulative gross defaults, above Fitch’s initial expectations. Yet the classes maintained their original ratings because the issuer has been active in substituting and repurchasing defaulted loans.
On the other hand, the second transaction, OLTT 2012-A, has performed within Fitch’s expectations to date, with cumulative defaults extrapolating below Fitch’s initial proxy. OLTT 2012-A has yet to incur a loss as all defaults have been substituted or repurchased to date.