ABS: U.S. Timeshare ABS Rating Methodology

Introduction

This report describes KBRA’s methodology for rating U.S. timeshare asset-backed securities (“timeshare ABS”). KBRA’s rating of a timeshare ABS transaction addresses the quality and expected performance of the underlying collateral; the originator and servicer’s business model and operational strength; and the transaction terms, including the capital structure, credit enhancement and legal structure.

The KBRA timeshare ABS process includes an operational assessment of the originator and servicer, the results of which are considered in our rating analysis. The latter is performed on the underlying collateral pool, as well as the originator’s historical static pool data, which is typically segmented by characteristics including credit quality and product type. Since the ongoing performance of timeshare receivables is dependent in part on the future perceived value of the timeshare, KBRA generally reviews the originator and servicer’s financial condition, property offerings…