Fitch Rates Sierra Timeshare 2015-3 Receivables Funding LLC

CHICAGO--()--Fitch Ratings assigns the following ratings to Sierra Timeshare 2015-3 Receivables Funding LLC:

--$235,950,000 class A asset-backed notes 'Asf'; Outlook Stable;

--$64,050,000 class B asset-backed notes 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

Stable Collateral Quality: Approximately 64.9% of Sierra 2015-3 consists of Wyndham Vacation Resorts, Inc. (WVRI)-originated loans; the remaining are Wyndham Resort Development Corporation (WRDC) loans. Fitch has determined that on a like-for-like FICO basis WRDC's receivables perform better than WVRI's. The weighted average (WA) original FICO score of the pool is 718.

Continued Recent Stabilization in Performance: Similar to other timeshare originators, Wyndham Worldwide's delinquency and default performance exhibited notable increases in the 2007-2008 vintages. However, WRDC's performance has improved since 2009, while WVRI continues to experience high defaults. Nonetheless, the 2013 vintage within the WVRI portfolio demonstrates relative stabilization in default performance. Fitch's CGD Proxy for this pool is 19.15%.

Adequate CE Structure: Initial hard credit enhancement (CE) is expected to be 32.50% and 13.50% for class A and B notes, respectively. Hard CE is composed of overcollateralization (OC), a letter of credit reserve account and subordination. Soft CE is also provided by excess spread and is expected to be 10.35% 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 managed portfolio.

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.

RATING SENSITIVITIES

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 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, and are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.

DUE DILIGENCE USAGE

Fitch was provided with due diligence information from Deloitte & Touche LLP. The due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to 250 sample loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in the reports titled 'Sierra Timeshare 2015-3 Receivables Funding LLC -- Appendix'. These R&W are compared to those of typical R&W for the asset class as detailed in the special report 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions' dated June 12, 2015.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating U.S. Timeshare Loan ABS (pub. 03 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866653

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Jul 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752340

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Related Research

Sierra Timeshare 2015-3 Receivables Funding, LLC -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872152

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992649

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=992649&flm_nm=15e_992649_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992649

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Andrew Tinari, +1-312-368-3127
Analyst
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Secondary Analyst
Du Trieu, +1-312-368-2091
Senior Director
Committee Chairperson
Hylton Heard, +1-212-908-0214
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Andrew Tinari, +1-312-368-3127
Analyst
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Secondary Analyst
Du Trieu, +1-312-368-2091
Senior Director
Committee Chairperson
Hylton Heard, +1-212-908-0214
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com