Wyndham Worldwide is marketing its 33rd securitization of timeshare loans.
The $300 million Sierra Timeshare 2017-1 Receivables Funding will issue two notes series, a $326.67 million Class A series with a preliminary ‘A’ structured finance rating from both Fitch Ratings and Standard & Poor's; and a Class B series totaling $63.33 million with a ‘BBB’ ratingfrom both agencies.
The Class A notes are supported by 31.5% initial credit enhancement comprised of overcollateralization, a letter-of-credit reserve account and subordination – a level slightly higher than the previous Sierra transaction.
Excess spread estimated at 9.81% per year is providing a soft credit-enhancement cushion, as well, a Fitch presale report issued Thursday stated. That is down from 10.46% in Wyndham’s previous transaction, Sierra Timeshare 2016-3 Receivables Funding last October.
The notes are backed by fixed-rate, long-term loans originated through either Wyndham Vacation Resorts (WVRI) or Wyndham Resort Development Corp. (WRDC), both subsidiaries of Wyndham Vacation Ownership, Inc. The 17,877 loans have an aggregate loan balance of $333.3 million, with an average loan balance of $18,646 – a lower figure than five of Wyndham’s most recent asset-backed offerings that exceeded $21,000 on average.
The loans in the pool are current, denominated with U.S. dollars with at least one payment made and maximum original terms of 15 years. They have a weighted average seasoning of 11 months, and were made to prime borrowers with a weighted average FICO score of 723, according to a pre-closing statistical pool.
About 70% of the pool were originated through the WVRI channel, whose loans tend to perform worse than receivables originated through WRDC, according to Fitch.
While loans through WRDC have improved since 2009, the WVRI portfolio “has just recently demonstrated improved performance within the 2013-2014 years,” according to Fitch, which has set a cumulative gross default rate of 18.8% in the pool – down from Sierra’s 2016-3 transaction estimate of 19% due to the migration of more loans from the WRDC portfolio.
