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Rating Action:

MOODYS RATES STARWOOD'S TIMESHARE SECUITIZATION Aaa

04 Dec 2003
MOODYS RATES STARWOOD'S TIMESHARE SECUITIZATION Aaa

Approximately $170 Million of Asset-Backed Securites Rated.

New York, December 04, 2003 -- Moody's Investors Service assigned a Aaa rating to the senior class of notes issued by SVO 2003-A VOI Mortgage Corp. in Starwood Vacation Ownership, Inc.'s (SVOI) securitization of timeshare receivables. Moody's also rated the Class B, C, and D securities Aa2, A2, and Baa3, respectively. The ratings on the Class A, B, C, and D notes are based on the amount of credit enhancement provided by each of the junior classes, overcollateralization, excess spread, and the reserve fund, the credit quality of the timeshare receivable obligors, the high quality of the resorts, the credit quality of Starwood Hotels and Resorts Worldwide, Inc.(Starwood) (Ba1, with a negative outlook), and the structure of the transaction.

The credit quality of Starwood's timeshare receivables in this transaction is average for the timeshare industry. However, one significant improvement in Starwood's overall timeshare business may lend itself towards better loan performance than Starwood's previous securitization (Series 2001-A), i.e., the development of Westin brand timeshare developments that are upscale, in two popular locations, Rancho Mirage and Maui, and marketed to a customer with a higher minimum income than what is typical in the timeshare industry. After the prefunding period is over, receivables related to these two resorts will comprise between 30% and 35% of the transaction.

Nevertheless, the overall gross charge-off rates on the timeshare receivables in this transaction may very well border on the high side of average due to the impact of seasoning, the concentration in Starwood's Vistana resorts in Orlando, Florida, and the current state of the economy. The performance to date of the previous SVOI securitization, SVO 2001-A is evidence of these factors.

Approximately 47.5% of the receivables in the transaction at closing were made to purchasers at one of the two Orlando resorts. Although there is probably a range of household incomes among Starwood's Vistana purchasers in Orlando, the reliance on off-premise centers to market to Orlando customers and the percentage of bi-annual product sold is evidence that weaker than average borrowers are part of the mix of borrowers buying in Starwood's Vistana Orlando resorts.

The percentage of gross charge-offs in this transaction, will under existing economic conditions be worse than Starwood's overall portfolio due to the 19 month weighted average seasoning of the loans. For the 19 months before the pool in this transaction was formed, a segment of the originations that would have been in this pool prepaid their loans. Typically better credit loans prepay more quickly, leaving the remaining pool with a higher percentage of losses as the loss rate in the first 19 months is lower than the prepayment and amortization rate.

The variability in expected loan performance due to customer dissatisfaction with the timeshare resorts amenities and upkeep in this transaction is somewhat reduced due to the ownership of the SVOI by its parent Starwood Hotels and Resorts Worldwide, Inc. (Ba1, with a negative outlook). Although not investment grade, Starwood is one of the largest hotel companies in the world with a significant franchise and brand-name recognition. It is investing more capital in its timeshare business and timeshare earnings are becoming a greater share of its overall earnings.

The complete ratings action is as follows:

Transaction: SVO 2003-A VOI Mortgage Corp., Vacation Ownership Interest Loan-Backed Notes, Series 2003-A

Issuer: SVO 2003-A VOI Mortgage Corp.

$87.86 mil; Class A, 3.95% Vacation Ownership Interest Loan-Backed Notes, rated Aaa

$19.1 mil; Class B, 4.25% Vacation Ownership Interest Loan-Backed Notes, rated Aa2

$28.65 mil; Class C, 4.97% Vacation Ownership Interest Loan-Backed Notes, rated A2

$35.335 mil; Class D, 6.96% Vacation Ownership Interest Loan-Backed Notes, rated Baa3

SVOI, acquired by Starwood in 1999, is located in Orlando, Florida, and has been in the timeshare business since 1980. VCH Portfolio Services, Inc., an affiliate of SVOI, is the servicer in this transaction.

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.
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