July 29 (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings to the notes issued by MVW Owner Trust 2013-1:
--$223,684,000, Class A asset-backed notes 'Asf'; Outlook Stable;
--$26,316,000, Class B asset-backed notes 'BBBsf'; Outlook Stable;
KEY RATING DRIVERS:
Moderately Weaker Obligor Credit Quality: The credit quality of the pool has weakened with a lower weighted average (WA) Fair Isaac Corp. (FICO) score of 713, due to the inclusion of sub-600 FICO scored loans, a change from 2012-1. However, overall collateral quality remains relatively consistent with that of the prior transaction and includes a lower concentration in foreign obligors and increased seasoning.
High Weighted Average Seasoning: The WA seasoning (WAS) of the 2013-1 collateral is 37 months, the highest of any MVWOT transaction. A pool with higher seasoning may experience lower cumulative gross defaults (CGDs) relative to less seasoned pools.
Structural Changes: Unlike the prior transaction, 2013-1 features a prefunding account that will hold up to 10% of the initial note balance after the closing date to purchase eligible timeshare loans. The transaction also allows for qualified substitutions of upgraded loans.
Credit Enhancement Changes: Initial hard credit enhancement (CE) for class A and B notes is 15.5% and 5.5%, respectively, compared with 16.5% and 5.5% for class A and B notes, respectively, in the 2012-1 transaction. The decline in enhancement for class A notes is due to a decline in subordination to 10.0% from 11.0% in 2012-1.
Stabilizing Performance: Similar to other timeshare originators and other consumer asset types, MVW's delinquency and default performance exhibited notable increases in the 2007 to 2009 vintages. However, the 2010 and 2011 vintages are displaying improved performance.
Quality of Origination/Servicing: MVW/MORI has demonstrated sufficient abilities as an originator and servicer of timeshare loans, as evidenced by the historical delinquency and default performance of securitized trusts and of the managed portfolio.
Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of MVW would not impair the timeliness of payments on the securities.
Unanticipated increases in the frequency of defaults could produce cumulative gross default (CGD) levels higher than the base case and would likely result in declines of CE and remaining default coverage levels available to the notes. Additionally, unanticipated increases in prepayment activity could also result in a decline in coverage. Decreased default coverage may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.
Hence, Fitch conducts sensitivity analysis by stressing both a transaction's initial base case CGD and prepayment assumptions by 1.5x and 2.0x and examining the rating implications on all classes of issued notes. The 1.5x and 2.0x increases of the base case CGD and prepayment assumptions represent moderate and severe stresses, respectively, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.