MOODY'S RATES MARRIOTT 2005-1 TIMESHARE RECEIVABLES DEAL Aaa
$196 Million of Asset-Backed Securities Rated
New York, June 14, 2005 -- Moody's Investors Service assigned a Aaa rating to the Class A notes issued
by Marriott Vacation Club Owner Trust 2005-1 in Marriott Ownership
Resorts, Inc.'s. (MORI) securitization of timeshare
receivables. 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 complete ratings action is as follows:
Issuer: Marriott Vacation Club Owner Trust 2005-1
$162,680,000 4.506% Class A Notes,
$8,820,000 4.625% Class B Notes,
$12,740,000 5.025% Class C Notes,
$11,760,000 5.622% Class D Notes,
CONSISTENT TIMESHARE RECEIVABLE POOL CHARACTERISTICS
A timeshare receivable arises under a loan to purchase vacation time.
The credit risk for this asset class must be analyzed in light of the
borrower's ability and willingness to pay the loan. The lack
of significant underwriting standards (which is typical for the industry),
and the high loan-to-sale price ratios are additional risk
factors. However, MORI does have underwriting standards that
are better than average that involve FICO score and downpayment ratios.
Moreover, the demographics of the borrowers, the quality of
the Marriott resorts, and the array of vacation choices combine
to be mitigating factors.
Similar to previous pools, the credit quality of the 2005-1
pool is better than the industry average. The weighted average
FICO score in the pool is 719, similar to 715 of the last transaction
and higher than the other previous deals (707 in 2004-1,
703 in 2002-1, and 705 in 2000-1). The percentage
of scores below 600 is low at 2.58%.
The loans were primarily 10 years long at origination (15-year
terms are offered under special circumstances to qualified borrowers,
and 20-year financing is offered to Ritz Carlton Club loans and
Marriott Grand Residence Club borrowers) and are fixed rate. The
weighted average original term of the current pool is 142 months,
compared to 139 months for last transaction. Given the three additional
months of seasoning, the weighted average remaining term are the
same at 135 months for both 2005-1 and 2004-2 transactions.
The rest of the characteristics of the receivables as of the statistical
cut-off date is comparable to the pool securing the company's
last securitization, 2004-2, on a weighted average
basis, with the coupon rate of 12.23%, down
payment of 12.44%, and foreign obligors of 5.29%.
The pool is geographically diversified with California having the largest
obligor concentration at 26%, with New York the next largest
at 6%. The last deal was also geographically diversified
with the largest state being California at 29%. There is
good property diversification in this deal with the three largest properties
comprising 11.3%, 9.1%, and 7.9%
of the pool.
REDUCED GROSS DEFAULT EXPECTATION PRIMARILY BASED ON THE SECURITIZED DEAL
Moody's expects this transaction will perform in line with MVCOT
2004-1 and 2004-2, given their similar characteristics.
Although the transactions are still early in their life, it appears
that both 2004-1 and 2004-2 transactions could perform better
than expected. Expected term transaction performance is further
supported by the quarterly static pool cumulative gross default experience
provided by the company . Additionally, the transaction will
also be helped by the exclusion of loans delinquent greater than 30 days.
To date, MORI's other outstanding transactions have generally
been performing well. The cumulative gross defaults for the 2000-1
transaction is 6.90% at month 52 with 19.88%
pool factor, which Moody's projects to an ultimate gross defaults
of less than 9%. Similarly, the cumulative gross defaults
of 4.27% at month 29 with 49.32% pool factor
suggests similar, if not lower final cumulative gross defaults for
the 2002-1 transaction.
SIMILAR STRUCTURE WITH SLIGHTLY LOWER CREDIT ENHANCEMENT
The MVCOT 2005-1 deal has a senior-subordinated, pro
rata pay structure, which is similar to the last transaction.
The transaction switches from pro rata to sequential and all excess spread
is paid as principal, during the time that a trigger event exists.
A trigger event will occur if (i) delinquencies of greater than 60 days
averaged over the last three due periods equal or exceed 4.50%,
(ii) defaults equal or exceed 0.75% of the outstanding balance
averaged over the last three due periods, or (iii) cumulative gross
charge-offs since the closing date exceed 22% of the original
aggregate Notes balance.
Similar to the 2004-1 and 2004-2 transactions, the
2005-1 deal will benefit from a pre-completion loan reserve
account, which is created to mitigate pre-completion loan
default risk caused by non-completion or delayed completion of
the related resort(s). There is also a non-declining reserve
fund that provides liquidity and credit enhancement for all the classes,
sized at 0.50% of the initial pool balance. .
In addition, Class A, B, and C Notes have further protection
provided by subordination of the Classes of Notes with lower distribution
priorities. Accordingly, Class A, B, and C will
have 17%, 12.5%, and 6% subordination,
respectively. As a comparision, the subordination for Class
A, B, and C in the 2004-2 transaction were 18.5%,
14%, and 7%, respectively.
Combined with lower excess spread due to higher coupon rates, the
MVCOT 2005-1 transaction will have lower total credit enhancement
compared to its last transaction , which is consistent with its
reduced gross default expection.
Marriott, through its wholly-owned subsidiary MORI which
is located in Orlando, Florida, has been in the timeshare
business since 1985. MORI is the servicer in this transaction and
is an acceptable servicer.
Additional research is available on www.moodys.com.
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service