The Westgate Resorts program is preparing to offer investors $205.9 million in timeshare collateralized notes, debt that is supported by timeshare loan payments from with some of the strongest borrower credit characteristics that the program has seen in almost 10 years.
Westgate will issue the notes through four tranches of class A, B, C and D notes, according to DBRS Morningstar. The transaction will repay principal on a pro rata basis, if there are no performance-related trigger events. Should a performance-based trigger event happen, the transaction will switch to a sequential-pay structure, the rating agency said.
The pool composition paints a strong credit picture. As of the deal's calculation date, the timeshare loans had about 32 months of seasoning, out of an original 115 months, DBRS said. That's only second behind the 38 months seen on the 2015-2 transaction. The timeshare loan pool has an average principal balance of $13,415, an interest rate of 15.1%. On a WA basis, the loans have a FICO score of 723, the highest that the program has seen since 2015.
Initially, total credit enhancement ranges from 72.14% on the class A notes to 13.90% on the class D notes, according to DBRS analysts. The pool also benefits from overcollateralization, subordination, and a reserve account representing 1.50% of the pool balance. Also initially, Westgate Resorts will fund the reserve account with cash at closing in its role as servicer. The transaction can fund the reserve account with a letter of credit, however, after the closing date, the rating agency said.
All the notes have the same final scheduled payment date of Jan. 20, 2038, according to the rating agency. Broken down by Westlake resort type, the family-oriented Town Center accounts for 17.8% of the pool; Smoky Mountain, with 17.4% of the pool; and Las Vegas Resort, Lakes Resort and Vacation Villas Resort with 16.6%, 16.4% and 10.8%, respectively.
DBRS assigns ratings of AAA to the class A notes; A to the class B notes; BBB to the class C notes and BB to the class D notes.
