CHICAGO, IL (March 12, 2013) — Fitch Ratings expects to assign the following ratings and Rating Outlooks to the notes issued by Sierra Timeshare 2013-1 Receivables Funding LLC:
–$230,780,000 Class A asset-backed notes ‘Asf'; Outlook Stable;
–$69,220,000 Class B asset-backed notes ‘BBBsf'; Outlook Stable.
KEY RATING DRIVERS:
Consistent Collateral: Approximately 67.3% of Sierra 2013-1 consists of WVRI-originated loans, and the remaining 32.7% are WRDC loans. In reviewing managed portfolio data that exclude sub-600 obligors, Fitch has determined that, on a like-for-like FICO basis, WRDC’s receivables perform better than WVRI’s.
Continued Weak WVRI Performance: Similar to other timeshare originators and other consumer asset types, Wyndham Worldwide delinquency and default performance exhibited notable increases in the 2007-2008 vintages. While more recent vintages are displaying improved performance under the WRDC platform, the improvement is far less evident under the WVRI platform.
Consistent Weighted Average Seasoning (WAS): The WAS of the 2013-1 collateral is seven months, consistent with 2012-3 and 2012-2 with six and seven months, respectively. Pools with higher seasoning may experience lower cumulative gross defaults (CGDs) relative to less seasoned pools, as seasoned pools have incurred a significant portion of their losses prior to their inclusion in a securitization.
Quality of Origination/Servicing: Wyndham Worldwide has demonstrated sufficient abilities as an originator and servicer of timeshare loans. This is evidenced by the historical delinquency and loss performance of securitized trusts and of the managed portfolio.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of Wyndham Worldwide and Wyndham Consumer Finance, Inc. (WCF) would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults could produce CGD levels higher than the base case and would likely result in declines of credit enhancement and remaining default coverage levels available to the notes. Additionally, unanticipated increases in prepayment activity could also result in a decline in coverage. Decreased default coverage may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
Thus, Fitch conducts sensitivity analysis stressing both a transaction’s initial base case CGD and prepayment assumptions by 1.5x and 2.0x and examining the rating implications on all classes of issued notes. The 1.5x and 2.0x increases of the base case CGD and prepayment assumptions represent moderate and severe stresses, respectively, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust’s performance.
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Additional information is available at ‘www.fitchratings.com‘. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
–‘Criteria for Rating U.S. Timeshare Loan ABS’ dated June 13, 2012′;
–‘Global Structured Finance Rating Criteria’ dated June 6, 2012.
Applicable Criteria and Related Research Sierra Timeshare 2013-1 Receivables Funding LLC (US ABS)
Criteria for Rating U.S. Timeshare Loan ABS
Global Structured Finance Rating Criteria
Fitch RatingsPrimary AnalystMargaret Rowe, +1-312-368-3167DirectorFitch Ratings, Inc.70 W. MadisonChicago, IL 60602orSecondary AnalystDu Trieu, +1-312-368-2091Senior DirectororCommittee ChairpersonBradley Sohl, +1-312-368-3127Senior DirectororMedia Relations:Sandro Scenga, New York, +1 212-908-0278Email: [email protected]
Source: Fitch Ratings