SECURIZATION MARKET FOR TIMESHARE HAS INDEED IMPROVED

Marriott's timeshare securitization announced on October 21rst is a perfect illustration on just how much the securitization market has improved over the last 6 months

 

 

Last week, Marriott completed a pretty attractive securitization deal. Since several transactions occurred, the attractiveness of the deal may have gotten lost in the details.

 

In March 2009, Marriott completed a private placement of $205MM floating rate Timeshare Loan Backed Notes with a commercial paper conduit administered by JPMorgan.  The rate on that deal was 9.87% and Marriott contributed $284MM in timeshare mortgages to the trust, retaining a 28% residual interest in the trust.  Not only was the advance rate a stingy 72%, but all the cash flow from the trust was being paid entirely to the holder of the Notes for 12 to 24 months; and only thereafter, Marriott was entitled to begin receiving a return on its residual interest.

 

Earlier this week Marriott bought back the the March deal for $233MM and then sold $218MM of those loans plus another $168MM of loans on its balance sheet into a trust which then issued $317MM of Timeshare Loan Backed Notes at a rate of 4.809%.  The new notes had an advance rate of 83% and paid a rate 50% below MAR's issue just 6 months earlier.  In addition, while any principal repayments on the residual accrue to the bondholder, MAR gets to keep the interest payments on the residual from day one.

 

Now that's a pretty good deal. If HOT's deal is anywhere as good they should book a healthy gain on their note sale in 4Q09.


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