Wyndham Worldwide is planning its second securitization of timeshare loans of the year, according Fitch Ratings.
The $275 million transaction, called Sierra Timeshare 2015-2, will be backed by a pool of fixed-rate timeshare loans originated by three of Wyndham Worldwide’s subsidiaries: Wyndham Vacation Resorts, (WVRI), Wyndham Resort Development Corp. (WRDC) and Shell Vacations Club. All of the notes reach final maturity in June 2032.
The senior tranche of class A notes totaling $213.9 million has been assigned a preliminary A’ rating from Fitch, while the $61.1 million class B notes are rated two notches above speculative grade, at BBB.’ The class A and B notes benefit from initial hard credit enhancement of 32.5% and 12.5%, respectively.
Deutsche Bank is the lead underwriter on the deal, with Wells Fargo Bank serving as a trustee.
The latest transaction is Wyndham’s Worldwide’s second Sierra transaction of the year and 28th to date.
There are 13,734 timeshare loans in the pool, with an average loan balance of $22,248. The loans have a weighted average (WA) remaining term of 117 months, and a WA seasoning of 3.56 months. The WA seasoning of loans in the pool has decreased from 5 months in the previous transaction and 10 months in the Sierra deal before that. Historically, pools with lower seasonings tend to experience higher cumulative defaults.
In comparison to Sierra 2015-1, the latest deal being is about $25 million bigger, with the class A notes benefiting from an additional 1% credit enhancement. The WA FICO score of obligors in the pool is the highest to date for Wyndham’s transactions at 722, compared to 721 for Sierra 2015-1.
Nearly 63.5% of the latest transaction consists of WVRI-originated loans, with the remaining 36.5% being WRDC-originated loans. WRDC loans have shown to perform better and have lower defaults than WVRI-originated loans; however, the default rate for WVRI loans has been relatively stable since 2013. Loans in the pool have the highest geographic concentrations in California (19.46%), Washington (8.6%), and Oregon (5%).
Fitch cites the experience of Wyndham Worldwide as a key strength of the transaction, as it has demonstrated its abilities to originate and service timeshare loans.
