First-time timeshare issuer Silverleaf Resorts made its way into the ABS primary market last week with a $108 million private deal via UBS Securities, and it will likely become a regular issuer in the sector, sources said. Joe Conner, chief operating officer at Silverleaf, said the company would likely be bringing its next ABS within 18 months, and that future deals would be of a similar size.

"We felt [the ABS market] was the market that would give us the best execution at this time," said Conner of why the company decided to test the waters of the ABS market. "It was a chance to lock in interest rates at a favorable pricing," he added.

The $46.85 million triple-A rated A tranche of the deal priced at 60 basis points over swaps, five basis points tight to guidance. The $28.52 million double-A tranche priced flat to guidance at 90 basis points over swaps, the single-A tranche also priced flat to guidance at 150 basis points over swaps and the triple-B tranche priced at 250 basis points over swaps, on the inner edge of guidance in the 250 to 275 basis point range over swaps.

The deal is backed by mortgage loans on Silverleaf's timeshare resort properties located in Florida, Georgia, Illinois, Massachusetts, Missouri and Texas. The collateral has a weighted average seasoning of 26 months and average FICO score of 657. The cumulative default level of the pool through month 27 is 17.5%. The cumulative default level rises to 21.3% after month 43 and remains constant. "This is a pretty strong pool. They put their best foot forward on their first term deal," said a source familiar with the deal.

Sources confirmed the triple-A tranche of the deal was six times oversubscribed with insurance companies making up the bulk of the book. Timeshares are often a haven for investors looking to increase yield while diversifying out of home equities, however the sector is still thinly populated, with only one other deal this year, a $196 million offering from Marriott Vacation Club International. "Investors would like to see more timeshare deals," said the source. He noted the advantage of deals such as Silverleaf's is that they offer relatively well-seasoned collateral, with healthy excess spread and attractive yield spreads.

"This deal really set [Silverleaf] up well," added the source. "Once you get in with investors, it just becomes easier from there on out," he quipped. "We look forward to the opportunity to come back to this market," said Conner. "This should be a process that is repeatable," he summed.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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