Vistana Signature Experiences, a former unit of Starwood Hotels & Resorts that was spun off and merged with a subsidiary of Interval Leisure Group in May, is marketing its first timeshare loan securitization under its new corporate structure.
Vistana was a frequent issuer of bonds backed by timeshare loans under Starwood, though it has not come to market since 2012. Following the spinoff, Starwood licensed Vistana to design, build, manage, and maintain its existing and future vacation ownership resorts under the Westin and Sheraton brands. As a result, Vistana’s timeshare business has remained relatively unchanged, according to Fitch Ratings, which is rating the new deal.
The securitization trust, VSE 2016-A VOI Mortgage LLC, will issue two tranches of notes: $277 million of senior notes with 11.4% credit enhancement are provisionally rated ‘A’ by Fitch and $23 million of subordinate notes with 4% credit enhancement are provisionally rated ‘BBB.’
Bank of America Merrill Lynch is the lead underwriter.
The credit quality of obligors in the collateral pool is consistent with that of Vistana’s prior deals, according to Fitch. The pool has a weighted average FICO score of 720. The pool also includes approximately 19% of 15 year original-term loans that have experienced higher cumulative gross defaults than 10-year original-term loans.
The pool has weighted average seasoning of 32 months; this reflects that fact that roughly 10% of the collateral was securitized in a prior transaction in 2010 that has since been called.
Fitch incorporated performance data from the prior transaction in estimating the cumulative gross defaults at 11.30%, in its base case scenario.
The deal will include a prefunding account that will hold up to 5% of the initial collateral balance to acquire additional collateral that meets the following criteria: weighted average FICO score of 720, no individual loan with a FICO below 650, 10% limit on foreign borrowers, among criteria.