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DCR Rates Sunterra Corporation's Timeshare
Mortgage-Backed Notes 'AAA', 'A', and 'BBB'
NEW YORK, May 6 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
assigned its 'AAA' (Triple-A) rating to the $52 million Class A Notes, 'A' (Single A)
rating to the $35 million Class B Notes, and 'BBB' (Triple B) rating to the $13
million Class C Notes issued by TerraSun, L.L.C., a bankruptcy-remote entity
wholly owned by Sunterra Corporation (Sunterra). SG Cowen Securities
Corporation was the exclusive placement agent for the Notes, which were privately
placed.
The Notes are secured by 11,847 mortgage loans originated by Sunterra and its
subsidiaries at 19 resorts located in eight states. The mortgage loans have an
aggregate outstanding principal balance of $106,810,653.
The Class A Notes are supported by 56.2 percent credit enhancement, the Class B
Notes are supported by 23.4 percent credit enhancement, and the Class C Notes
are supported by 11.2 percent credit enhancement. Credit enhancement for all but
the Class C Notes constitutes subordination, overcollateralization (6.3 percent of
mortgage loans), and a reserve account (4.9 percent of mortgage loans). The Class
C Notes are enhanced only by overcollateralization and the reserve account.
The ratings assigned to each Class of Notes is based on the following factors:
The performance of Sunterra's vacation ownership portfolio; Credit enhancement
sufficient to cover cumulative gross defaults of $55.6 million at 'AAA' (Triple-A),
$35.3 million at 'A' (Single-A), and $29.4 million at 'BBB' (Triple-B);
The origination experience of Sunterra; The quality and geographic diversity of the
Resorts; The seasoning of the mortgage loans; and True-sale and
bankruptcy-remote legal opinions.
This transaction represents the 21st timeshare mortgage-backed issue rated by
DCR. It is also the 14th timeshare mortgage-backed securitization rated solely by
DCR.
Sunterra Corporation (NYSE: OWN) acquires, develops, operates, and manages
vacation ownership resorts, markets and sells vacation ownership interests at its
resorts, and provides consumer financing to purchasers of vacation ownership
interests. When measured by the number of its resort locations, Sunterra is the
world's largest vacation ownership company. (As of March 31, 1999, Sunterra had
89 resorts.) DCR rates Sunterra's Bank Credit Facility 'BB+' (Double-B-Plus),
senior notes 'BB' (Double-B), senior subordinate notes 'BB-' (Double-B-Minus), and
convertible subordinated notes 'B+' (Single-B-Plus).
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