Hilton Grand Vacations Completes $375 Million Term Securitization

Rhea-AI Summary

Hilton Grand Vacations (NYSE:HGV) has completed a $375 million securitization of timeshare loans through Hilton Grand Vacations Trust 2024-2 (HGVT). The issuance includes four classes of Notes: $217 million Class A at 5.50% coupon rate, $80 million Class B at 5.65%, $57 million Class C at 5.99%, and $21 million Class D at 6.91%, with an overall weighted average coupon rate of 5.68% and advance rate of 99%.

This marks HGV’s 11th securitization, highlighting strong investor interest with peak oversubscription of 5.2x and orders from over 30 unique investors. The funds will aid in debt reduction and general corporate purposes. The issuance was managed by BofA Securities and co-managed by several other financial institutions.

Positive

• Completed a $375 million securitization of timeshare loans.
• Strong investor interest with peak oversubscription of 5.2x.
• Managed to achieve the tightest AAA spread in the timeshare ABS market since March 2022.
• Proceeds will be used to pay down debt and for general corporate purposes.
• Involvement of major financial institutions like BofA Securities, Barclays, and Goldman Sachs.

Negative

• High coupon rates ranging from 5.50% to 6.91% could indicate higher borrowing costs.
• The issuance involves significant fees that will reduce the net proceeds available for debt reduction and corporate purposes.

Insights

Financial Analyst

Hilton Grand Vacations (HGV) has completed a $375 million securitization of timeshare loans. Securitization is a financial process where loans are bundled and sold as securities to investors. This recent transaction is notable due to several factors. Firstly, the weighted average coupon rate was 5.68%. The coupon rate is the interest rate paid by the notes and a lower rate generally means lower interest expenses for HGV. The peak oversubscription of 5.2x indicates strong investor demand, which is also seen in the 60 orders from more than 30 unique investors. The high demand allowed HGV to achieve the tightest AAA spread in the timeshare ABS market since March 2022. This suggests confidence in HGV’s financial health and the quality of the underlying loans. The proceeds will be used to pay down debt, which can improve the company's balance sheet and free up resources for other uses.

For retail investors, such strong demand and favorable terms signal that HGV is in a solid financial position. This could potentially lead to better stock performance, although it's vital to consider any broader market conditions and sector-specific risks.

Market Research Analyst

This securitization deal offers a clear indication of how the market perceives HGV’s financial health and the stability of the timeshare industry. The tightest AAA spread since March 2022 implies that investors have confidence in the timeshare loan market, which can be somewhat cyclical and susceptible to economic downturns. An oversubscription of 5.2x and a total of 60 orders suggest there is more demand than supply for these notes, highlighting investor confidence in both HGV and the broader market. This could be interpreted as a positive sentiment towards HGV in the short term.

For retail investors, it's important to recognize that such a strong performance in securitization can indicate a stable revenue stream for HGV. However, investors should remain cognizant of the cyclical nature of the industry and the potential for economic downturns to impact future performance.

ORLANDO, Fla.--(BUSINESS WIRE)-- Hilton Grand Vacations Inc. (NYSE:HGV) announces today the completion of a $375 million securitization of timeshare loans through Hilton Grand Vacations Trust 2024-2 (“HGVT”). Four classes of Notes were issued by HGVT, including approximately $217 million of Class A Notes, approximately $80 million of Class B Notes, approximately $57 million of Class C Notes, and approximately $21 million of Class D notes.

The Class A Notes have a coupon rate of 5.50%, the Class B Notes have a coupon rate of 5.65%, the Class C Notes have a coupon rate of 5.99%, and the Class D Notes have a coupon rate of 6.91%, for an overall weighted average coupon rate of 5.68%, and an overall advance rate of 99%.

"Even amidst a busy issuance calendar, interest from investors in the HGVT platform remains strong," said Dan Mathewes, president and chief financial officer of Hilton Grand Vacations. "With peak oversubscription of 5.2x, we were able to successfully achieve the tightest AAA spread in the timeshare ABS market since March 2022."

Proceeds of the issuance, net of fees, will be used to pay down debt and for other general corporate purposes.

This transaction marks HGV’s 11^th term securitization of timeshare loans, and the first issuance of The Grand Islander, a Hilton Grand Vacations Club collateral under the HGVT platform. The transaction saw significant peak order demand with approximately 60 orders from more than 30 unique investors.

BofA Securities served as the Structuring Lead Manager and Joint Bookrunner along with Barclays, Deutsche Bank Securities, Goldman Sachs & Co. LLC, MUFG, and Wells Fargo Securities. Citizens Capital Markets, Regions Securities LLC, R. Seelaus & Co., LLC, and Truist Securities served as a Co-Managers. Alston and Bird LLP represented HGV as issuer counsel.

The Notes were offered in a private placement within the U.S. to qualified institutional buyers pursuant to Rule 144A and outside the U.S. in accordance with Regulation S under the Securities Act of 1933, as amended. This press release is an announcement of record only and does not constitute an offer to sell or the solicitation of an offer to buy the Notes, all of which have been sold. Certain classes of the transaction were rated by Standard & Poor’s Financial Services LLC (S&P) and Fitch Ratings (Fitch).

Important Notice

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements convey management’s expectations as to the future of HGV, and are based on management’s beliefs, expectations, assumptions and such plans, estimates, projections and other information available to management at the time HGV makes such statements. Forward-looking statements include all statements that are not historical facts, and may be identified by terminology such as the words “outlook,” “believe,” “expect,” “potential,” “goal,” “continues,” “may,” “will,” “should,” “could,” “would,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “future,” “guidance,” “target,” or the negative version of these words or other comparable words, although not all forward-looking statements may contain such words. The forward-looking statements contained in this press release include statements related to HGV’s revenues, earnings, taxes, cash flow and related financial and operating measures, and expectations with respect to future operating, financial and business performance and other anticipated future events and expectations that are not historical facts. HGV cautions you that our forward-looking statements involve known and unknown risks, uncertainties and other factors, including those that are beyond HGV’s control, which may cause the actual results, performance or achievements to be materially different from the future results. Any one or more of these risks or uncertainties could adversely impact HGV’s operations, revenue, operating profits and margins, key business operational metrics, financial condition or credit rating. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in HGV’s most recent Annual Report on Form 10-K, which may be supplemented and updated by the risk factors in HGV’s quarterly reports, current reports and other filings HGV makes with the SEC. HGV’s forward-looking statements speak only as of the date of this communication or as of the date they are made. HGV disclaims any intent or obligation to update any “forward-looking statement” made in this communication to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

About Hilton Grand Vacations Inc.

Hilton Grand Vacations Inc. (NYSE:HGV) is recognized as a leading global timeshare company and is the exclusive vacation ownership partner of Hilton. With headquarters in Orlando, Florida, Hilton Grand Vacations develops, markets, and operates a system of brand-name, high-quality vacation ownership resorts in select vacation destinations. Hilton Grand Vacations has a reputation for delivering a consistently exceptional standard of service, and unforgettable vacation experiences for guests and more than 700,000 Club Members. Membership with the Company provides best-in-class programs, exclusive services and maximum flexibility for our Members around the world.

For more information, visit www.corporate.hgv.com. Follow us on Instagram, Facebook, LinkedIn, X (formerly Twitter), Pinterest and YouTube.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240530350550/en/

Investor Contact:

Mark Melnyk

407-613-3327

mark.melnyk@hgv.com

Media Contact:

Lauren George

407-613-8431

lauren.george@hgv.com

Source: Hilton Grand Vacations Inc.

FAQ

What is the value of the securitization completed by Hilton Grand Vacations?

Hilton Grand Vacations completed a $375 million securitization of timeshare loans.

What are the coupon rates for the Notes issued by Hilton Grand Vacations?

The coupon rates for the Notes range from 5.50% to 6.91%, with an overall weighted average coupon rate of 5.68%.

How were the proceeds from Hilton Grand Vacations' securitization intended to be used?

The proceeds will be used to pay down debt and for general corporate purposes.

How many investors showed interest in Hilton Grand Vacations' recent securitization?

Over 30 unique investors showed interest, with approximately 60 orders placed.

Which financial institutions managed Hilton Grand Vacations' securitization?

The securitization was managed by BofA Securities, Barclays, Deutsche Bank Securities, Goldman Sachs & Co., MUFG, and Wells Fargo Securities.