News Column

Fitch to Rate to Hilton Grand Vacations Trust 2014-A; Issues Presale

June 6, 2014

CHICAGO--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: Hilton Grand Vacations Trust 2014-A (US ABS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749867

Fitch Ratings expects to assign the following ratings and Outlooks to the notes issued by Hilton Grand Vacations Trust 2014-A upon closing of the transaction:

--$173,470,000 class A notes 'AAsf'; Outlook Stable;

--$26,530,000 class B notes 'Asf'; Outlook Stable.

Fitch's presale report is available to all investors at 'www.fitchratings.com' or by clicking on the above link.

KEY RATING DRIVERS

Strong Collateral: The 2014-A pool has a weighted average (WA) Fair Isaac Corp. (FICO) score of 742. Additionally, the pool has a WA seasoning of 31 months. A highly seasoned pool typically experiences lower defaults than an unseasoned pool.

Improving Performance: Hilton Resorts Corporation's (HRC) delinquency and default performance exhibited notable increases in the 2005?2009 vintages. However, since 2010 the portfolio has experienced year- over-year declines in cumulative gross defaults (CGD). Furthermore, the 2013-A transaction has performed well with 1.14% in CGD to date, which extrapolates to 6.15% based on the pool factor of 81%.

High Foreign Obligor Concentration: The 2014-A pool consists of approximately 15% of loans made to foreign obligors, the majority of which are from Japan (approximately 12% of the pool). The Japan portfolio has historically performed consistent with the domestic portfolio. However, the trust could be exposed to weakness in foreign economies, which could result in increased defaults.

Available CE Structure: Initial hard credit enhancement (CE) is expected to be 16% and 3% for class A and B notes, respectively. Hard CE is composed of overcollateralization (OC), a reserve account and subordination. Soft CE is also provided by expected excess spread of 8.91% per annum.

Quality of Origination/Servicing: HRC has demonstrated sufficient abilities as an originator and servicer of timeshare loans. This is evidenced by the historical delinquency and loss performance of the managed portfolio and 2013-A transaction.

Legal Structure Integrity: The legal structure of the transaction should provide that a bankruptcy of HRC or Grand Vacations Services LLC (GVS) 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. This 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. They are intended to provide an indication of the rating sensitivity of notes to unexpected deterioration of a trust's performance.

Fitch's analysis of the Representations and Warranties (R&W) of this transaction can be found in 'Hilton Grand Vacations Trust 2014-A - Appendix'. This R&W is compared to those of typical R&W for the asset class as detailed in Fitch's April 17, 2012 special report, 'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Criteria for Rating U.S. Timeshare Loan ABS' (June 10, 2013);

--'Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance' (April 17, 2012);

--'Hilton Grand Vacations Trust 2014-A - Appendix' (June 6, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Criteria for Rating U.S. Timeshare Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709841

Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=676496

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=833444

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.



Fitch Ratings

Primary Analyst:

Margaret Rowe, +1-312-368-3167

Director

Fitch Ratings, Inc., 70 W. Madison Street, Chicago, IL 60602

or

Secondary Analyst:

Du Trieu, +1-312-368-2091

Senior Director

or

Committee Chairperson:

Hylton Heard, +1-212-908-0214

or

Media Relations:

Sandro Scenga, New York, +1 212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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