Starwood Hotels & Resorts Worldwide yesterday completed a securitization involving the issuance of $166 million of notes by SVO 2009-B VOI Mortgage Corp.
Starwood contributed approximately $200 million in timeshare mortgages with an 83% advance and note rate of 5.81%. Starwood expects that the securitization will result in a pre-tax gain of over $15 million. The notes have not been and will not be registered under the Securities Act of 1933, as amended, or any state securities laws.
Fitch Ratings recently published its outlook on the sector and said it expected a stable forecast for timeshare ABS. The agency said that during the current recession, there has been notable deterioration in delinquency and default performance in the universe of timeshare ABS.
However, the agency said that the sizeable and growing levels of credit enhancement have shielded the Fitch-rated portfolio from negative rating actions during the current recession.
Virtually all defaults to date have been repurchased by the transactions’ respective seller/servicers. As such, credit enhancement has built from initial levels on all Fitch-rated transactions. The growth in credit enhancement should continue to insulate the portfolio, which underpins the stable outlook on timeshare ABS ratings.
Marriott International, Starwood and Wyndham Worldwide Corp. all have taken steps to restructure their timeshare business by reducing cost structures and curtailing development to maximize near-term cash flow.
Reducing exposure to timeshare development has benefited these issuers’ credit profiles, but the timeshare business models remain reliant on receivable securitizations to generate positive cash flow.