Travel + Leisure Co. Completes $350 Million Term Securitization
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The completion of a term securitization transaction by Travel + Leisure Co. signifies a strategic move to manage liquidity and leverage its timeshare receivables. The $350 million in asset-backed notes, with a weighted average coupon rate of 5.66%, indicates investor confidence in the company's creditworthiness. The advance rate of 95.25% is a testament to the quality of the underlying assets and the company's ability to negotiate favorable terms.
Comparing the current transaction's blended interest rate to the previous one in October 2023, which is 112 basis points lower, suggests an improved market perception of the company's risk profile or a general decrease in market interest rates. This cost of capital reduction could lead to enhanced profitability through decreased interest expenses on the securitized debt. Investors should note the tiered structure of the notes, with varying coupon rates reflecting the differing risk profiles of each class. The higher coupon rate of 8.02% for Class D notes, for instance, indicates a higher risk associated with these notes.
The issuance of asset-backed notes by Sierra Timeshare 2024-1 Receivables Funding LLC, an indirect subsidiary of Travel + Leisure Co., showcases a nuanced approach to risk distribution. The tranching of notes into Class A, B, C and D, with different coupon rates, allows investors to select their preferred risk-return profile. The structure of the transaction, relying on Rule 144A and Regulation S, suggests a targeted approach to reach qualified institutional buyers and international investors, bypassing the need for a public offering.
From a credit risk perspective, the increase in the advance rate by 350 basis points could imply a lower perceived risk or higher demand for the company's securities. It is important for investors to consider the performance of the underlying timeshare receivables, as their ability to generate cash flow is directly linked to the servicing of these notes. An analysis of historical default rates and recoveries within the timeshare sector, along with Travel + Leisure Co.'s specific portfolio performance, would be essential for a comprehensive risk assessment.
The transaction's reliance on Rule 144A and Regulation S indicates a strategic choice to streamline the capital-raising process. Rule 144A allows for the resale of privately placed securities to qualified institutional buyers, which can expedite the process and potentially reduce costs associated with public offerings. Regulation S provides an exemption for offerings made outside the U.S., thereby expanding the potential investor base. The legal framework of such a transaction is complex and it is designed to balance the company's need for capital with regulatory compliance and investor protection.
Investors should be aware that the securities are not registered under the Securities Act of 1933, which means they are subject to certain restrictions on resale and may not have the same level of public disclosure as registered securities. The announcement of the sale as a matter of record only underlines that the offering is complete and no further sales are expected. This legal structuring is a common practice in private placements and is indicative of the company's strategic financial management.
“Our first public term offering of the year received considerable interest from the investment community, which led to strong execution and a blended interest rate of 112 basis points below our October 2023 transaction and an increase in the advance rate of 350 basis points,” said Mike Hug, Chief Financial Officer of Travel + Leisure Co.
Sierra Timeshare 2024-1 Receivables Funding LLC issued
Sierra Timeshare 2024-1 Receivables Funding LLC is an indirect subsidiary of Travel + Leisure Co. The transaction was completed in reliance upon Rule 144A and Regulation S as a placement of securities not registered under the Securities Act of 1933, as amended, or any state securities law. All of such securities having been sold, this announcement of their sale appears as a matter of record only.
About Travel + Leisure Co.
As the world’s leading membership and leisure travel company, Travel + Leisure Co. (NYSE:TNL) transformed the way families vacation with the introduction of the most dynamic points-based vacation ownership program at Club Wyndham, and the first vacation exchange network, RCI. The company delivers more than six million vacations each year at 270+ timeshare resorts worldwide, through tailored travel and membership products, and via Travel + Leisure GO - the signature subscription travel club inspired by the pages of Travel + Leisure magazine. With hospitality and responsible tourism at the heart of all we do, our 19,000+ dedicated associates bring out the best in people and places around the globe. We put the world on vacation. Learn more at travelandleisureco.com.
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Investor Contact:
Kendrick Calilao
Investor Relations
(407) 626-4050
IR@travelandleisure.com
Media Contact:
Steven Goldsmith
Public Relations
(407) 626-5882
Steven.Goldsmith@travelandleisure.com
Source: Travel + Leisure Co.
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