As access to the securitization market remains nearly impossible, lenders are looking for other ways to shore up capital.

Last week, N.J.-based hospitality company Wyndham Worldwide Corp. announced that it would be eliminating its reliance on securitization. It has tapped the ABS market in the past for the receivables from its timeshare, or "vacation ownership," business.

Since 2006, the company has done six term securitizations - one in 2006, three in 2007 and two in 2008, plus annual updates of conduit financings that were initially originated in 2002.

The recent announcement comes shortly after the November completion of a new $943 million securitized timeshare receivables conduit facility led by JPMorgan Securities. The 364-day facility bears interest based on variable commercial paper rates plus a spread.

In June, Sierra Timeshare 2008-2 Receivables Funding, an indirect subsidiary of Wyndham Vacation Ownership, closed a term securitization transaction of $450 million in investment-grade asset-backed notes. The notes were backed by vacation ownership receivables originated by subsidiaries of Wyndham, and the cost of funds, excluding transaction fees, was 7.15%.

But as the ABS market has become increasingly illiquid, with promises of a further drying up to come, the company has had to shift its business model away from dependence on securitization in order to maintain capital.

"The market conditions are such that we felt that we needed to control our own destiny," said Betsy O'Rourke, senior vice president in marketing and communications at Wyndham.

This includes further reducing the company's projected sales pace by an additional third or 40% in total versus 2008. In its 3Q08 earnings release, the company said Wyndham Vacation Ownership would refocus its sales and marketing efforts on consumers with higher credit quality, decrease the level of timeshare development, and enhance the cash flow from the business unit.

In a call last week, Wyndham said projected sales are now expected to total $1.2 billion for 2009 versus $2 billion in 2008. However, with this reduction, the company said it can produce at least $100 million in 2009 and around $500 million in 2010. The company also said it will be able to maintain adequate revolver capacity of around $300 million by the end of 2009.

"This will give us the flexibility, if necessary, to run the business without accessing the securitization market past 2009," said Stephen P. Holmes, Wyndham Worldwide chairman and chief executive officer, on a call last week

The firm said the reduced level of sales will result in the loss of 4,000 jobs at the company.

In October, Wyndham was put on review for a downgrade by Moody's Investors Service and was given a negative outlook by Standard & Poor's. S&P's rating action does not affect ratings on the six Sierra timeshare securitizations it rated, the agency said. Wyndham Consumer Finance acts as the servicer for all six transactions.

Still Maintaining

Wyndham says its timeshare business is resilient. "We have a terrific product that continues to appeal to consumers with consistent household incomes and vacationing patterns, and have sold it successfully in previous slow periods in the economy," said Virginia Wilson, executive vice president and chief financial officer at Wyndham Worldwide. "Existing customers have predictably been inclined to buy more timeshares when they are happy with what they bought, and our sales plans include ongoing sales to our approximately 800,000 owner families. For some customers, buying a timeshare is a more affordable way to vacation the way that they prefer."

Timeshare sales during the months of October and November met expectations, Holmes said, and advance reservations and occupancy at the timeshare resorts remain consistent with last year's levels.

Despite recent challenges, Wyndham said it isn't writing off ABS forever. "We are not planning to exit the ABS market, but we concluded that it was prudent to take our sales pace down for 2009," Wilson said. "That way, we won't be dependent on the ABS market if it doesn't come back in volume, or if the terms remain unattractive to us as the issuer."

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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