March 10 (The following statement was released by the rating agency)
Fitch Ratings expects to assign the following ratings
and Rating Outlooks to Sierra Timeshare 2014-1 Receivables Funding LLC:
--$231,820,000 class A asset-backed notes 'Asf'; Outlook Stable;
--$68,180,000 class B asset-backed notes 'BBBsf'; Outlook Stable.
KEY RATING DRIVERS
Consistent Collateral: Approximately 65.30% of Sierra 2014-1 consists of
WVRI-originated loans (the remaining are WRDC loans). Fitch has determined that
WRDC's receivables perform better than WVRI's on a like-for-like FICO basis. The
weighted average (WA) Original FICO score of the pool is 717.
Continued Weak WVRI Performance: Similar to other timeshare originators and
other consumer asset types, Wyndham Worldwide's delinquency and default
performance exhibited notable increases in the 2007?2008 vintages. While more
recent vintages are displaying improved performance under the WRDC platform, the
improvement is not evident under the WVRI platform.
Sufficient CE Structure: Initial hard credit enhancement (CE) is expected to be
34.50% and 14.50% for class A and B notes, respectively. Hard CE is composed of
overcollateralization (OC), a letter of credit (LOC) reserve account and
subordination. Soft CE is also provided by excess spread and is expected to be
9.89% per annum.
Quality of Origination/Servicing: Wyndham Worldwide has demonstrated sufficient
abilities as an originator and servicer of timeshare loans. This is evidenced by
the historical delinquency and loss performance of securitized trusts and of the
Legal Structure Integrity: The legal structure of the transaction should provide
that a bankruptcy of Wyndham Worldwide and Wyndham Consumer Finance, Inc. (WCF)
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. This would likely result
in declines of credit enhancement 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.
Thus, Fitch conducts sensitivity analysis 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. As such, they are intended to provide an indication of
the rating sensitivity of notes to unexpected deterioration of a trust's
Key rating drivers and rating densitivities are further detailed in the presale
report (published today). Fitch's analysis of the Representations and Warranties
(R&W) of this transaction can be found in 'Sierra Timeshare 2014-1 Receivables
Funding LLC - Appendix'. These R&Ws are compared to those of typical R&W for the
asset class as detailed in Fitch's April 17, 2012 special report (referenced at
the end of the press release).
The presale report is available at 'www.fitchratings.com' or by clicking on the
Link to Fitch Ratings' Report: Sierra Timeshare 2014-1 Receivables Funding LLC