MOODY'S RATES MARRIOTT VACATION CLUB OWNER TRUST 2005-2 NOTES Aaa
$230 Million of Asset-Backed Securities Rated.
New York, November 21, 2005 -- Moody's Investors Service assigned a Aaa rating to the Class A notes issued
by Marriott Vacation Club Owner Trust (MVCOT) 2005-2 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
Issuer: Marriott Vacation Club Owner Trust 2005-2
$190,900,000 5.250% Class A Notes,
$ 10,350,000 5.340% Class B Notes,
$ 14,950,000 5.668% Class C Notes,
$ 13,800,000 6.205% Class D Notes,
LAS VEGAS TIMESHARE RECEIBABLES INCLUDED FOR THE FIRST TIME, OTHERWISE
CONSISTENT 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 scores 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 2005-2
pool is better than the industry average. The weighted average
FICO score in the pool is 716, similar to 719 of the last transaction
and 715 of 2004-2; 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 3.38%,
compared to 2.58% for the last transaction. In addition,
6.81% of the receivables were originated from obligors without
FICO scores, compared to 5.47% for the last transaction.
The loans are primarily 10 years long at origination (15-year terms
are offered under special circumstances to qualified borrowers,
and 20-year financing is offered on Ritz Carlton Club and Marriott
Grand Residence Club loans) and are fixed rate. The weighted average
original term of the current pool is 133 months, compared to 142
months for the last transaction. Given similar seasoning,
the weighted average remaining term is nine months shorter for 2005-2
transaction than 2005-1 transaction. The reduction on the
weighted average terms is mainly due to higher percentage Marriott Vacation
Club International loans in the current pool. The weighted average
coupon rate on the receivables of 13.26% is about 1%
higher than the 2005-1 transaction. 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 on a weighted
average basis, with the down payment of 12.22%,
and foreign obligors of 5.14%. The pool is geographically
diversified with California having the largest obligor concentration at
28%, and New York the next largest at 7%. The
last deal was also geographically diversified with the largest obligor
residence being California at 26%.
The 2005-2 transaction marks the first securitization for MORI
that included Las Vegas timeshare receivables. Loans for timeshares
in the newly opened Grand Chateau at Las Vegas comprise 16% of
the collateral pool, which makes it the largest resort concentration.
As a result, Moody's beleives there is higher variability
around loss expectations for the current transaction due to the lack of
performance history for the Las Vegas loans.
SIMILAR GROSS DEFAULT EXPECTATION WITH HIGHER VARIABILITY
Moody's expects this transaction will perform in line with MVCOT
2004-1, 2004-2 and 2005-1, given their
similar characteristics. Although the transactions are still early
in their life, it appears that both 2004-1 and 2004-2
transactions are performing better than expected. Additionally,
the transaction will also be helped by the exclusion of loans delinquent
greater than 30 days.
SIMILAR STRUCTURE WITH SLIGHTLY HIGHER CREDIT ENHANCEMENT
The MVCOT 2005-2 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 4.80%,
(ii) defaults equal or exceed 0.80% 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, 2004-2 and 2005-1 transactions,
the 2005-2 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,
similar to the last transaction.
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,
Combined with higher excess spread as the weighted average coupon rate
on the receivables increased more than the bond coupon rates, the
MVCOT 2005-2 transaction will have higher total credit enhancement
compared to its last transaction , which is consistent with its
higher variability 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