Fitch Rates MVW Owner Trust 2016-1

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings assigns the following ratings to MVW Owner Trust 2016-1:

--$230,570,000 class A asset-backed notes 'Asf'; Outlook Stable;

--$19,430,000 class B asset-backed notes 'BBBsf'; Outlook Stable.

KEY RATING DRIVERS

Improving Credit Quality: With a weighted average (WA) FICO score of 738, the strength of scored obligors in 2016-1 is notably better than that of MVWOT 2015-1, which had a WA FICO score of 726. The WA FICO for 2016-1 is the highest since the 2009-2 transaction.

Decrease in Seasoning, Increase in Foreign Obligors: Although consistent with prior transactions, WA seasoning of 18 months and a foreign obligor concentration of 16.4% represent a shift from 43 months and 12.1% in 2015-1, respectively. While Fitch incorporated seasoning credit in its cumulative gross default (CGD) proxy derivation, an additive stress was also applied to account for potential weakness in the Latin American segment.

Presence of Prefunding Account: As with the prior MVWOT transactions, 2016-1 features a prefunding account that will hold up to 20% of the initial note balance after the closing date to purchase eligible timeshare loans. The transaction also allows for qualified substitutions of upgraded loans of up to 15% of the pool balance.

Sufficient Credit Enhancement: Initial hard credit enhancement (CE) for class A and B notes is 11.5% and 4.0%, respectively. Class A CE is down from 12.25% while class B is unchanged from 2015-1. Available CE is sufficient to support stressed multiples of Fitch's 'Asf' and 'BBBsf' CGD assumption of 10.5%.

Stabilizing Performance: With the exception of certain foreign segments, the 2010-2014 vintages display improved performance relative to the weaker 2007-2009 periods.

Quality of Origination/Servicing: MORI has demonstrated sufficient abilities as an originator and servicer of timeshare loans, as evidenced by the historical delinquency and default performance of securitized trusts and the managed portfolio.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of MVW would not impair the timeliness of payments on the securities.

RATING SENSITIVITIES

Unanticipated increases in the frequency of defaults could produce CGD levels higher than the base case and would likely result in declines in 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.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided in Form ABS Due Diligence-15E and focused on a comparison and recomputation of certain characteristics with respect to 254 sample loans. Fitch considered this information in its analysis and the findings did not have an impact on the agency's analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link at the end of this rating action commentary.

REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS

A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under Related Research below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Criteria for Rating U.S. Timeshare Loan ABS (pub. 16 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882873

Criteria for Servicing Continuity Risk in Structured Finance (pub. 17 Dec 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875586

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Related Research

MVW Owner Trust 2016-1 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885677

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010252

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1010252&flm_nm=15e_1010252_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010252

Endorsement Policy

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160811005838/en/

Fitch Ratings
Primary Analyst
Peter Manofsky
Director
+1 312-368-2068
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Du Trieu
Senior Director
+1 312-368-2091
or
Committee Chairperson
Tracy Wan
Senior Director
+1 212-908-9171
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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