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Rating Action:

MOODY'S RATES MARRIOTT 2004-2 TIMESHARE SECURITIZATION Aaa

23 Nov 2004
MOODY'S RATES MARRIOTT 2004-2 TIMESHARE SECURITIZATION Aaa

Approximately $180 Million of Asset-Backed Securities Rated.

New York, November 23, 2004 -- Moody's Investors Service assigned a Aaa rating to the Class A notes issued by Marriott Vacation Club Owner Trust 2004-2 in Marriott Ownership Resorts, Inc.'s. (MORI) securitization of timeshare receivables - its second securitization in 2004. Moody's also rated the class B, C, and D notes Aa2, A2, and Baa2, respectively. The ratings are based on the amount of credit enhancement provided to each of the classes, the credit quality of the timeshare receivable obligors, the quality of the resorts built by MORI which is a wholly-owned subsidiary of Marriott International, Inc. (Marriott) rated Baa2, the services and amenities provided to the resorts, the financial ability and incentive of Marriott to properly manage the resorts, the flexibility of vacation options, and the structure of the transaction.

The riskiness of timeshare receivables is reflected in the inherent nature of the asset - a loan to purchase vacation time. (In general, timeshare receivables are often secured by a deeded interest in the vacation time or in points in a vacation club). Nevertheless, the demographics of the MORI timeshare borrowers, the quality of the Marriott resorts, and the array of vacation choices combine to mitigate some of these risks.

Marriott's core timeshare brand, (herein called MVCI, and not including the Ritz Carlton Club, Grand Residence Club, and Horizons brands), is a business brand which gives timeshare owners flexibility in vacation choices. The MVCI timeshare owner can exchange its time for time in another resort in MVCI or in another resort through Interval International, one of the two major timeshare exchange companies. There are approximately 43 different resorts in approximately 27 locations in MVCI. MVCI timeshare owners purchase time in a particular season, and not for one or two specific weeks. Furthermore, another exchange option, the Marriott Rewards Program, allows owners to trade in their time for points every other year which can be redeemed to stay at any one of 2,700 Marriott hotels. Reward points can also be accumulated when using the services of other companies such as American Airlines and American Express.

Marriott's timeshare business is part of its overall strategy to associate the Marriott name with high quality service and accommodations. Marriott must maintain a high degree of customer satisfaction in order to maintain and enhance its brand names. The quality of the Marriott name impacts Marriott's core businesses, including licensing its name for hotels and managing hotels.

The MVCI timeshare receivables, which comprise approximately 82.2% of the receivables in the transaction are better than average for the timeshare industry. The credit quality of these borrowers is better than average due to their relatively high household incomes and good FICO scores. The average household income of the MVCI portfolio is approximately $149,000 which is higher than the industry average. The weighted average FICO score in the transaction (which includes receivables from the other brands in the deal -- Horizons, 6.67%, Marriott Grand Residence Club, 2.37%, and the Ritz-Carlton Club, 8.07%) is 715.

Except for the percentage of pre-co (certificate of occupancy) loans, the aggregate pool in this transaction is similar to MVCI's last securitization and the continued strong performance of MVCI originations should result in improved gross loss expectations. MVCI's higher purchase prices, as well as some resulting longer term contracts, and high prepayment speeds before the pool was formed add some volatility in expected performance.

The percentage of pre-co loans is high in this transaction at approximately 28.6% of the pool. The risk of non-completion of the timeshare units relating to these receivables and defaults resulting as a consequence thereof, are addressed by an additional reserve fund and mitigated by MVCI's track record and the credit quality of its owner, Marriott.

Compared to the last transaction, the differences in pool characteristics (except for the pre-co loans) are not that significant. One positive difference is an overall improvement in FICO scores and one potential negative difference is, with respect to the MVCI receivables, a wider distribution of purchase prices with a greater percentage of high purchase prices. There are less 20 and 15 year contracts. Resort diversity continues to be very good and the percentage of foreign borrowers continues to decline.

The complete ratings action is as follows:

Issuer: Marriott Vacation Club Owner Trust 2004-2

$147.515 mil; Class A, 4.192% Timeshare Loan Backed Notes, rated Aaa

$8.145 mil; Class B, 4.341% Timeshare Loan Backed Notes, rated Aa2

$12.67 mil; Class C, 4.741% Timeshare Loan Backed Notes, rated A2

$12.67 mil; Class D, 5.389% Timeshare Loan Backed Notes, rated Baa2

Marriott, through its wholly-owned subsidiary MORI which is located in Orlando, Florida, has been in the timeshare business since 1984. MORI is the servicer in this transaction and is considered by Moody's to be a competent servicer.

New York
Jay Eisbruck
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Andrew Lipton
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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