July was the most active month for timeshare ABS issuance with close to $600 million of new paper pricing. With $1.3 billion of issuance year-to-date, 2013 is on pace to match the $2.3 billion sold in 2012.
Hilton, the newest issuer in timeshare ABS, priced its inaugural $250 million deal called HGVT 2013-A last week.
The single-class of, single-A rated notes, with a weighted average life of 2.58 years, priced at the low end of guidance at 160 basis points over interpolated swaps, 15 basis points wider than the 2.9-year Marriott deal, MVWOT 2013- 1 class As, which also priced last week.
Earlier in July Wyndham Worldwide priced its $250 million timeshare loan securitization, Sierra Timeshare 2013-2 Receivables Funding LLC on July 27. The deal's single-A rated tranche priced at 150 basis points.
“Compared to other transactions this year, the HGVT pool has a higher weighted average FICO score, at 745, more seasoned loans, with an averaging seasoning of 30 months and a lower expected loss rate, 7.4%,” explained analysts at Deutsche Bank in a report.
A consistent, programmatic issue in the ABS market, Wyndham has regularly come to the market, two to three times each year, since 2008.
Wyndham priced the triple-A's issued from Sierra Timeshare 2013-2 50 basis points wide of where the single-A notes priced in its March deal, Sierra Timeshare 2013-1.
The deal’s triple-B notes priced at 215 basis points, 35 basis points wide of where the triple-B notes priced in March.
Wyndham’s senior vice president of consumer finance, Mark Johnson, said that “the coupon on the transaction worked very effectively" despite the fact that a choppier market led to wider pricing on the July deal.
“We think the demand and pricing we see is indicative of our proven success in the market even though the markets may sometimes be choppy,” said Johnson.
In addition to the class A, single-A rated and class B, triple-B rated tranches, Wyndham, included a class C, double-B rated tranche as part of the transaction it just recently closed. The issuer hasn’t opted to include this level of subordination in its transactions since 2011.
Adding the double B tranche allowed the issuer to get an effective advance rate of 98%, explained Johnson.
In 2008, advances on customer receivables fell to rates below 60%; this decreased the leverage possible from securitizing timeshare loans and increased the cost at which capital could be raised. The weighted average advance rate on securitizations that occurred in 2009 was 67.8% in 2009.
By 2012 issuers were able to structure deals with advance rates between 87% and 96%, similar to rates pre-crisis levels, according to data Barclays presented at a panel on emerging ABS at the American Securitization Forum’s annual conference in January.
Appetite for Timeshare ABS should also get a boost by the steady performance of the asset class, said Deutsche Bank.
Fitch Ratings timeshare ABS index showed that securitized timeshare loans with late payments declined again in the first quarter. Total delinquencies for the first quarter were 3.27%, down from 3.55% in the fourth quarter of 2012. Defaults also fell in the first quarter, to 0.72% from 0.75% in the fourth quarter of 2012.
