Marriott Vacations Worldwide Completes $430 Million Term Securitization
- Completion of a $430 million securitization of vacation ownership loans
- Blended interest rate of 5.48%, lower than previous transactions
- Strong investor demand for the transaction
- Backed by a pool of approximately $439 million of vacation ownership loans from various timeshare brands
- Issuance of three classes of notes by the Issuer
- None.
Insights
The completion of a $430 million securitization of vacation ownership loans by Marriott Vacations Worldwide Corporation represents a significant financial maneuver that could influence the company's liquidity and debt profile. The securitization process involves the creation of asset-backed securities by pooling various loans and selling them to investors, thereby providing the company with immediate capital. The blended interest rate of 5.48% indicates the average cost of borrowing through this securitization, which is notably lower than the previous transaction's rate by approximately 100 basis points, suggesting improved market conditions or investor confidence in the company's creditworthiness.
The use of proceeds to pay down outstanding credit facility obligations could improve the company's leverage ratios and potentially lower future interest expenses. However, investors should be aware that securitization also entails risks, such as interest rate fluctuations and the quality of the underlying loans. The high gross advance rate of 98% reflects strong collateral backing but also implies a minimal retention of risk by the issuer, which may affect the recovery rate in case of defaults.
Marriott Vacations Worldwide's strategy to securitize vacation ownership loans is indicative of the broader trend in the hospitality and timeshare industry towards leveraging financial instruments to manage liquidity. This transaction, particularly due to the scale of $430 million, can have a ripple effect on the industry's financing practices. The strong investor demand highlighted by the company's CFO points to a robust appetite for such securities, which could encourage other players in the market to consider similar financial structures.
Given the competitive landscape of the timeshare industry, the ability to efficiently raise capital can provide a strategic advantage. The successful placement of Class A, B and C notes with varying interest rates demonstrates a tiered approach to risk management and could serve as a benchmark for future securitizations within the sector. The impact on the company's stock could be positive if the market perceives this transaction as a sign of financial prudence and strategic capital allocation.
The legal framework surrounding this securitization is crucial for understanding its implications. The offering was conducted under Rule 144A and Regulation S, which govern the resale of securities to qualified institutional buyers and non-U.S. persons, respectively. This suggests a targeted approach to investor outreach, ensuring compliance with securities regulations while potentially limiting the investor base to those who meet specific criteria.
Furthermore, the fact that the notes have not been registered under the Securities Act of 1933, as amended, indicates that they are subject to certain restrictions on transferability. This could influence the liquidity of the notes in the secondary market. Investors should be aware of these legal nuances, as they can affect the ease with which one can divest from these securities. The absence of a public offering also underscores the importance of due diligence for potential investors, given the reduced disclosure requirements compared to registered securities.
“We are pleased with the strong investor demand this transaction received, with a blended interest rate approximately 100 basis points below our November 2023 transaction,” said Jason Marino, Executive Vice President and Chief Financial Officer.
The transaction was backed by a pool of approximately
The Company intends to use the proceeds of the 2024-1 securitization, net of fees, to pay down outstanding credit facility obligations and for other general corporate purposes.
Important Notice
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The notes have not been registered under the Securities Act of 1933, as amended, or any state securities law. Unless so registered, the notes may not be offered or sold in
About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products, and services. The Company has approximately 120 vacation ownership resorts and approximately 700,000 owner families in a diverse portfolio that includes some of the most iconic vacation ownership brands. The Company also operates an exchange network and membership programs comprised of more than 3,200 affiliated resorts in over 90 countries and territories, and provides management services to other resorts and lodging properties. As a leader and innovator in the vacation industry, the Company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International, Inc. and an affiliate of Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. For more information, please visit www.marriottvacationsworldwide.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240314067318/en/
Neal Goldner
Investor Relations
407-206-6149
neal.goldner@mvwc.com
Cameron Klaus
Global Communications
407-513-6606
cameron.klaus@mvwc.com
Source: Marriott Vacations Worldwide Corporation
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