DBRS Morningstar Assigns Provisional Ratings to Westgate Resorts 2023-1 LLC

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of notes to be issued by Westgate Resorts 2023-1 LLC (the Issuer):

-- $45,250,000 Timeshare Collateralized Notes, Series 2023-1, Class A rated AAA (sf)
-- $44,000,000 Timeshare Collateralized Notes, Series 2023-1, Class B rated A (low) (sf)
-- $39,750,000 Timeshare Collateralized Notes, Series 2023-1, Class C rated BBB (low) (sf)
-- 16,000,000 Timeshare Collateralized Notes, Series 2023-1, Class D rated BB (low) (sf)

The provisional ratings are based on DBRS Morningstar’s review of the following analytical considerations:

(1) The transaction capital structure and form and sufficiency of available credit enhancement are commensurate with the proposed ratings. Credit enhancement is in the form of overcollateralization, subordination, amounts held in the reserve fund, and excess spread. Credit enhancement levels are sufficient to support the DBRS Morningstar-projected cumulative gross loss (CGL) assumption under various stress scenarios.

(2) The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary Baseline Macroeconomic Scenarios For Rated Sovereigns - April 2023 Update, published on April 28, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

(3) The transactions ability to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. For this transaction, the rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal by the Final Maturity Date. The ratings on the Class B, Class C and Class D Notes addresses the ultimate payment of interest and the ultimate payment of principal by the respective Final Maturity Dates.

(4) Westgate 2023-1 employs a full turbo structure where all excess cashflow is used to repay note holders with no excess spread going back to issuer until the notes are paid in full.

(5) Westgate Resorts, Ltd. (Westgate) has sufficient operating history and capabilities with regard to developing and managing timeshare resorts as well as the origination, underwriting, and servicing of timeshare loans.

(6) The credit quality of the collateral reflects the ratings, and Westgate’s timeshare loans portfolio has had consistent performance.

(7) The Westgate senior management team has considerable experience and a successful track record within the timeshare industry.

(8) The legal structure and expected presence of legal opinions will address the true sale of the assets to the Issuer, the non-consolidation of each of the depositors and the Issuer with Westgate, that the Issuer has a valid first-priority security interest in the assets, and the consistency with DBRS Morningstar’s “Legal Criteria for U.S. Structured Finance.”

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

Notes:
All figures are in in U.S. dollars unless otherwise noted.

The principal methodology is Rating U.S. Timeshare Loan Securitizations (May 3, 2021), which can be found at https://www.dbrsmorningstar.com/research/377879/rating-us-timeshare-loan-securitizations

Other methodologies referenced in this transaction are listed at the end of this press release.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482 .

The rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Rating U.S. Structured Finance Transactions (February 6, 2023)
https://www.dbrsmorningstar.com/research/409449/rating-us-structured-finance-transactions

Operational Risk Assessment for U.S. ABS Servicers (April 5, 2023)
https://www.dbrsmorningstar.com/research/412303/operational-risk-assessment-for-us-abs-servicers

Operational Risk Assessment for U.S. ABS Originators (April 5, 2023)
https://www.dbrsmorningstar.com/research/412302/operational-risk-assessment-for-us-abs-originators

Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].