Vistana Signature Experiences, a timeshare lender for Hyatt, Sheraton and Westin-branded resorts, is planning its second securitization of vacation ownership loans since its spin-off from Starwood Hotels & Resorts last year.
VSE 2017-A VOI Mortgage LLC is a $325 million securitization of timeshare loans originated by Vistana and Hyatt Vacation Ownership (HVO). The transaction is a follow-up to Vistana’s debut $300 million asset-backed portfolio (subsequently upsized to $375 million) in September 2016, just months after Vistana was spun off and merged with a subsidiary of Interval Leisure Group.
Despite the shift in corporate structure, Vistana still retains the exclusive license to design, build, manage and maintain Starwood vacation resorts under the Westin and Sheraton brands. Unlike last year's deal, the new securitization includes Hyatt loans, according to a presale report from Fitch Ratings.
The capital structure includes a $239.9 million Class A notes series with an expected AAA rating from Fitch. The notes are supported by 28.95% credit enhancement, nearly three time the 11.4% CE required of the senior notes in Vistana's debut transaction last year.
The collateral has some riskier characteristics, including a lower the weighted average FICO of 711, compared with 720 for the previous deal. There is also a concentration of longer-term loans and loans to foreign obligors, and the portfolio includes a larger portion of loans with less seasoning; the weighted average is 7 months, down from 32 months.
Because of the weaker collateral pool, Fitch has raised the projected cumulative gross default proxy to 12%, up from 11.3% last year.
Also being issued are Class B notes from a $58.6 million tranche with an A rating, and $26.5 million in Class C notes with a BBB rating.
The underlying pool of 14,145 loans has an aggregate loan balance of $266.8 million, or $18,863 apiece, with an average 15-year original terms. The loans come with a weighted average coupon of 13.5% (helping to extend the excess spread over the note coupon by an expected 9.61% a year, according to Fitch).
Fitch reported that since the shift to ILG, Vistana’s timeshare business has been “relatively unchanged,” with distinct loan programs between both vacation timeshare brands. The main difference is extending an external exchange program across both brands allowing owners the access trades between the Westin and Hyatt properties.
Last year’s $300 million deal was the first securitization of Hyatt/Westin-branded vacation timeshare loans since 2012.
Fitch notes that the transaction features a 20% prefunding account that will purchase new timeshare loans for the pool for up to six months. At least 40% of the purchases will be from called collateral from a Starwood 2011 securitization, according to Fitch.
Wells Fargo is the lead underwriter.