MOODY'S RATES MARRIOTT VACATION CLUB OWNER TRUST 2006-1 NOTES
$250 Million of Asset-Backed Securities Rated.
New York, June 12, 2006 -- Moody's Investors Service assigned a Aaa rating to the Class A notes issued
by Marriott Vacation Club Owner Trust (MVCOT) 2006-1 in Marriott
Ownership Resorts, Inc.'s. (MORI) securitization of
timeshare receivables in Series 2006-1. Moody's also rated
the class B, C, and D notes Aa2, A2, and Baa2,
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 2006-1
$207,500,000 5.737% Class A Notes,
$ 12,500,000 5.827% Class B Notes,
$ 16,250,000 6.125% Class C Notes,
$ 13,750,000 6.502% Class D Notes,
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 2006-1
pool is better than the industry average. The weighted average
FICO score in the pool is 714, similar to 716 of the last transaction
and 719 of 2005-1. The percentage of scores below 600 is
low at 5.02%, compared to 3.38% for
the last transaction. In addition, 8.24% of
the receivables were originated from obligors without FICO scores,
compared to 6.81% for the last transaction.
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
Grand Residence borrowers) and are fixed rate. The weighted average
original term of the current pool is 129 months, compared to 133
months for the last transaction. Given slightly more seasoning,
the weighted average remaining term is five months shorter for the 2006-1
transaction than the 2005-2 transaction. The weighted average
downpayment of 13.02% is slightly higher than 12.22%
in the 2005-1 transaction. The rest of the characteristics
of the receivables as of the statistical cut-off date are comparable
to the pool securing the company's last securitization on a weighted
average basis, with the coupon rate on the receivables of 13.27%,
and foreign obligor concentration of 6.66%. The pool
is geographically diversified with California having the largest obligor
concentration at 26%, and New York the next largest at 8%.
The last deal was also geographically diversified with the largest obligor
residence being California at 28%.
SIMILAR GROSS DEFAULT EXPECTATION
Moody's expects this transaction will perform in line with MVCOT
2005-2, given their similar characteristics. Although
the transactions are still early in their life, it appears that
the 2005-1 deal would perform better than 2004-2 with both
transactions performing better than their respective loss expectations.
Very early performance data indicated that 2005-2 deal performed
in line so far with 2004-2 deal. Expected term transaction
performance could be further supported by the quarterly static pool cumulative
gross default experience. Additionally, the transaction will
also be helped by the exclusion of loans delinquent greater than 30 days.
The 2006-1 transaction is the second securitization for MORI that
included Las Vegas timeshare receivables. The Grand Chateau at
Las Vegas, the only resort in Nevada included in the current pool,
is the largest property comprising 16% of the pool. The
next two largest properties comprise 10% and 9% of the pool.
Similar to 2005-2 portfolio, Moody's expects higher
variability around its expected loss for the 2006-1 portfolio because
of limited performance data of Las Vegas loans in the transactions.
SIMILAR STRUCTURE WITH SIMILAR CREDIT ENHANCEMENT
The MVCOT 2006-1 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 prior three due periods equal or exceed 4.80%,
(ii) defaults equal or exceed 0.80% of the outstanding balance
averaged over the prior 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 and 2005 transactions, the 2006-1 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, 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%, and 5.5% subordination,
Excess spread declined as the bond coupon rates increased more than weighted
average coupon rate on the receivables. The MVCOT 2006-1
transaction will have similar total credit enhancement compared to its
last transaction, which is consistent with the similar loss expectations.
In accordance with its updated collection and credit policy, MORI
can defer loan payments for a specified grace period for the Force Majeure
Loans, timeshare loans for which a natural disaster or act of terror
has had a direct impact on the ability of the related obligor to make
payments due to disruption of employment or to place of residence.
In general, the aggregate loan balance of all Force Majeure Loans
cannot exceed 5% of the outstanding pool balance. In addition,
Force Majeure Loan Reserve Account will be established if the total loan
balance of all the Force Majeure Loans exceeds 2.5% of the
outstanding pool balance. Excess spread will be retained and deposited
into Force Majeure Loan Reserve Account until an amount is accumulated
that equates to the total loan balance of all the Force Majeure Loans
minus 2.5% of the outstanding pool balance.
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.
Additional research is available on www.moodys.com.
Structured Finance Group
Moody's Investors Service
Structured Finance Group
Moody's Investors Service