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Rating Action:

Moody's downgrades three and confirms six classes of Marriott Vacations timeshare ABS notes

21 Mar 2012

Approximately $206 million of asset-backed securities affected

New York, March 21, 2012 -- Moody's Investors Service has downgraded three classes of notes and confirmed six classes of notes from three Marriott Vacation Club Owner transactions. The underlying collateral consists of timeshare loan receivables serviced by Marriott Ownership Resorts, Inc. ("MORI"), a subsidiary of Marriott Vacations Worldwide Corporation ("MVW").

RATINGS RATIONALE

Collateral performance was the driver of today's actions. The downgrades of the Class A and Class B notes from the 2007-1 transaction and the Class A notes from the 2008-1 transaction reflect Moody's increased loss projections for the transactions' collateral pools, relative to credit enhancement levels for the downgraded notes. Series 2007-1 Class C and Class D and all four classes of Series 2007-2 notes were confirmed because the ratio of total credit enhancement to remaining net losses for each tranche is consistent with their current ratings.

The Class A and Class B notes of the Series 2007-1 and Class A notes of the Series 2008-1 transactions have each been downgraded one notch because existing credit enhancement relative to our increased expected remaining losses on each pool was no longer sufficient to support the previous ratings. Gross charge-off to liquidation rates for both transactions have remained at levels of approximately 20-30%, high relative to the pre-2009 time frame, for longer than we expected. The 20% to 30% gross charge-off to liquidation rates for 2007-1 represent modest improvement, but less than expected, from the peak levels of 25% to 35% in 2009-2010. Series 2008-1 saw a peak of 35% in 2011 but otherwise has trended fairly consistently in the 20% to 30% range. The rates for both transactions dipped below 15% in the February 2012 reporting period but we view this as an outlier and note upticks in the delinquency pipelines during this same reporting period.

Our expected lifetime net loss as a percentage of the original pool balance plus cumulative loan substitution amount to date, without taking into consideration of defaulted loans optionally repurchased by the servicer, is 15.3% for the 2007-1 transaction and 12.7% for the 2008-1 transaction, which compare to 6.8% and 8.1%, respectively, expected at closing. These updated lifetime net loss expectations translate into remaining net losses on the current outstanding pool balances of 17% and 14.5% on the 2007-1 and 2008-1 transactions, respectively.

Credit enhancement from subordination, overcollateralization and reserve accounts (in aggregate, hard enhancement) expressed as a percentage of current pool balances for the Class A bonds in 2007-1 and 2008-1 is 27.5% and 20.4%, respectively, as of February 29, 2012. By way of comparison, Class A bonds in the 2005 and 2006 vintage Marriott Vacations timeshare transactions have 34% to 39% credit enhancement from these sources. The 2007-1 and 2008-1 transactions also have excess spread of approximately 7% per annum, as a percentage of outstanding pool balance, which is similar to other Marriott Vacations timeshare transactions. Combining hard enhancement and the value we attribute to excess spread, total enhancement for the Class A notes of each of the 2007-1 and 2008-1 transactions is approximately 2.7 times our updated remaining net loss expectation, compared with 3.6 and 3.4, respectively, at closing. These current coverage ratios are not sufficient to support Aaa ratings.

Although the credit strength of MVW, the sponsor and parent of the servicer, has weakened as a result of the spin-off from Marriott International ("Marriott", Baa2 with Stable outlook), increased operational risk, which we broadly define as the risk to a transaction from servicing disruption, is mitigated by Marriott's guarantees of the performance of MORI's obligations under the Indentures of the transactions. The newly spun-off company, MVW, has lower credit strength than Marriott because of the higher risk profile of the timeshare development and finance industry, business concentration risk and a smaller operational scale.

The ratings of the Class A, B, C and D notes for all three transactions could be upgraded in the future if the lifetime expected net losses are 10% lower, or downgraded if the lifetime expected net losses are 10% higher than the levels indicated above.

The performance evaluation of the transactions is based on the adequacy of the available credit enhancement for each class of notes relative to Moody's expected loss on the remaining pools and assumed loss volatility. Moody's considers the following as sources of credit enhancement: overcollateralization, reserve funds, subordination, excess spread, as well as protection provided by other structural features of the transactions.

The principal methodology used in these rating actions was "Moody's Approach to Rating Vacation Timeshare Loan Securitizations", published on September 19, 2011, and is available at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies sub-directory on Moody's website.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. Primary sources of uncertainty with regard to expected losses are the weak economic environment, which adversely impacts the income-generating ability of the borrowers. We expect overall a sluggish recovery in most of the world's largest economies, with elevated fiscal deficits and persistent, high unemployment levels.

RATINGS:

Complete actions are as follows:

Issuer: Marriott Vacation Club Owner Trust 2007-1

Cl. A, Downgraded to Aa1 (sf); previously on Dec 15, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to Aa3 (sf); previously on Dec 15, 2011 Aa2 (sf) Placed Under Review for Possible Downgrade

Cl. C, Confirmed at A3 (sf); previously on Dec 15, 2011 A3 (sf) Placed Under Review for Possible Downgrade

Cl. D, Confirmed at Baa3 (sf); previously on Dec 15, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: Marriott Vacation Club Owner Trust 2007-2

Cl. A, Confirmed at Aa1 (sf); previously on Dec 15, 2011 Aa1 (sf) Placed Under Review for Possible Downgrade

Cl. B, Confirmed at Aa3 (sf); previously on Dec 15, 2011 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. C, Confirmed at A3 (sf); previously on Dec 15, 2011 A3 (sf) Placed Under Review for Possible Downgrade

Cl. D, Confirmed at Baa3 (sf); previously on Dec 15, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade

Issuer: Marriott Vacation Club Owner Trust 2008-1

Cl. A, Downgraded to Aa1 (sf); previously on Dec 15, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

REGULATORY DISCLOSURE:

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 31 January 2012. ESMA may extend the use of credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, if ESMA decides that exceptional circumstances arise that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past 6 months.

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

JingJing Dang
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Amelia (Amy) Tobey
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades three and confirms six classes of Marriott Vacations timeshare ABS notes
No Related Data.
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