TIMESHARE SECURITIZATION MARKET ACTIVE IN '98

Source: Duff & Phelps Credit Rating Co.

February 9, 1999
According to Duff & Phelps Credit Rating Co., the timeshare term securitization market last year experienced its most active year to date. Six term securitizations closed, one right-to-use interest-backed and five fee-simple interest-backed, totaling $530 million. Five of 1998's six securitizations were rated by DCR (all fee-simple interest-backed), which totaled $400 million. This brought the total number of term timeshare securitizations rated by DCR, since 1992, up to 20. Of the five securitizations rated by DCR, four carried DCR's ratings only. All six of 1998's securitizations were privately placed. Four of the six securitizations were sponsored by repeat issuers.

Below is a brief description of the five term securitizations rated by DCR.

• Signature Resorts, now Sunterra Corporation, sponsored its first term securitization in June. At that time, it was only the second transaction to receive DCR's 'AAA' (Triple-A) rating. (The first was Metropolitan Mortgage Timeshare Trust 1997-A.)
• Westgate Resorts, formerly Central Florida Investments, Inc. (CFI), brought its seventh securitization to market in August. At $165 million, it was (and still remains) the largest timeshare issue rated by DCR.
• Fairfield Communities, Inc. sponsored its second term securitization in August. The company's first securitization closed in September 1993.
• Vistana, Inc. came to market with its first term securitization in September. The senior tranche of this $66 million transaction received DCR's 'AAA' (Triple-A).
• Orange Lake Resort & Country Club brought is second securitization to market in December. The company's first securitization closed in November 1992.

DCR expects that the issuance of timeshare mortgage- backed securities will continue to proliferate over the next few years. Issuance in 1999 should exceed 1998's level . As the spread differential between commercial paper and term securities continues to contract, developers will 'take out' their
commercial paper warehouse lines with term securitizations. DCR expects that at least four of the six issuers from 1998 will be in the market in 1999. DCR would not be surprised if two of the sponsors, who have been absent from the term market for more than three years, resurfaced or if the first securitization sponsored by a timeshare specialty lender since Litchfield Financial's 1995 transaction closed.

DCR's rating methodology for timeshare mortgage-backed securities and its New Financing Reports on 1998's Westgate, Fairfield, and Vistana securitizations can be obtained by visiting the asset-backed securities page of DCR's web site (http://www.dcrco.com/).