Hilton Grand Vacations Trust 2017-A

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1 Presale: Hilton Grand Vacations Trust 2017-A This presale report is based on information as of Feb. 17, The ratings shown are preliminary. This report does not constitute a recommendation to buy, hold, or sell securities. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Preliminary Ratings Class Preliminary rating(i) Preliminary amount (mil. $) Subordination and overcollateralization (%) A AA (sf) B A (sf) (i)the rating on each class of securities is preliminary and subject to change at any time. Profile Expected closing date March Collateral Depositor Seller, administrator, and performance guarantor Arranger Servicer Indenture trustee, backup servicer, and custodian Vacation ownership interval (timeshare) loans. HGV Depositor LLC. Hilton Resorts Corp. Deutsche Bank Securities Inc. Grand Vacation Services LLC. Wells Fargo Bank N.A. Rationale The preliminary ratings assigned to Hilton Grand Vacations Trust 2017-A's $350 million timeshare loan-backed notes series 2017-A reflect S&P Global Ratings' opinion of the credit enhancement available in the form of overcollateralization, a reserve account, available excess spread, and subordination of the class B notes for the class A notes' benefit. Our preliminary ratings also reflect our view of Grand Vacation Services LLC's (the servicer's) Primary Credit Analysts: Jay Srivats, San Francisco (1) ; jay.srivats@spglobal.com Yalan Tao, New York ; yalan.tao@spglobal.com See complete contact list on last page(s) FEBRUARY 17,

2 servicing ability and experience in the timeshare market. Business Description Prior to Jan. 3, 2017, Hilton Resorts Corp. (HRC) was a wholly-owned subsidiary of Hilton Worldwide Inc., which was also the parent of Hilton Grand Vacations Inc. (HGV), among 13 other Hilton brands. HRC maintains sales centers in Oahu and Waikoloa, Hawaii, Orlando, Fla., Las Vegas, New York, Myrtle Beach and Hilton Head Island, S.C., Park City, Utah, Washington, DC, and internationally in Japan, Korea and the United Kingdom. On Jan 3, 2017, Hilton Worldwide Inc. spun off HGV. Following the spin-off, HGV is an independent company, incorporated in Delaware and headquartered in Orlando, Fla. In connection with the spin-off, HGV entered into a 100-year license agreement with Hilton Worldwide Inc. Under this agreement, HGV is granted exclusive rights to Hilton marks and intellectual property in its vacation ownership business. HRC developed its flagship property in Las Vegas in Since that time, HRC has developed 21 timeshare resorts in Nevada, Florida, Hawaii, New York, Washington D.C., and Scotland. HRC manages more than 7,500 timeshare units affiliated to one of two membership programs that are operated by Hilton Grand Vacations Club. The two membership programs, Hilton Grand Vacations Club and The Hilton Club, combined have more than 260,000 members. Grand Vacation Services LLC, a wholly owned subsidiary of HRC, provides loan servicing and collections services for both the timeshare receivables and the homeowners associations (HOAs) at each resort. Other HRC subsidiaries provide real estate, title services, property management, operations, and other services to the vacation ownership business. Hilton Grand Vacations Management LLC, a wholly owned subsidiary of HRC, provides property management, operations, and HOA services for the HGV resorts and HRC's fee-for-service business. Timeshare Property Regimes A vacation ownership interest (VOI) loan is typically an installment sale or mortgage loan with an original term generally ranging from seven to 10 years and is secured by a right to use the property or by a deeded interest, as applicable. Historically, timeshares were sold on a fixed-week, fixed-unit basis, which gives the timeshare owner the right to use a designated unit in a specified property for a defined time period each year in perpetuity. Since the early 1990s, some VOIs have been sold through a points program, whereby purchasers buy points in a system that entitles them to use any of the properties within a developer's system at any time during the year, subject to availability. While most fixed-week VOIs are exchangeable, the points system allows VOI owners greater flexibility because the owner can determine when, where, and how long each timeshare vacation occurs. The loans in HRC's securitized portfolio are deeded timeshare interests with accompanying points in the Hilton Grand Vacations Club. FEBRUARY 17,

3 Underwriting And Collection Process HRC prescreens prospective buyers in the early stages of the marketing and sales process. Like most other timeshare developers, HRC generally checks prospective obligors' credit scores and researches their credit histories for any bankruptcies. Purchasers who wish to finance must provide a minimum 10% down payment and meet other eligibility requirements, such as being a minimum 18 years old, providing a credit report and identity verification, and not being in bankruptcy or the subject of certain liens or judgments in the county where the timeshare property is located. Loan interest rates are based on purchaser's FICO score, down payment, loan term, payment method, country of residence, and whether they are an existing HRC owner, among other factors. HRC begins attempting to collect delinquent loans once the payment is three days past due until an account is delinquent beyond 120 days, at which time the account is assigned to its deed recovery team. Deed recovery is either voluntary (a warranty deed in lieu of foreclosure) or involuntary through judicial or nonjudicial foreclosure utilizing outside counsel for bankruptcy and foreclosure proceedings. Transaction Structure This transaction is Hilton Grand Vacations third term securitization of timeshare loans and includes two classes of fixed-rate notes that will pay interest and principal monthly in a specified priority (see table 1). Table 1 Payment Waterfall Priority Payment 1 Indenture trustee fees and backup servicer fees (capped at $25,000 per calendar year). 2 Backup servicer transition expenses related to a servicing transfer (capped at a $300,000 cumulative total) and custodian fees and indemnities (capped at $10,000 per year), pro rata. 3 Owner trustee fees, expenses, and indemnities (capped at $10,000 per calendar year). 4 Administrator fees and expenses (capped at $5,000 per calendar year). 5 Servicing fees including any remaining unpaid from the prior period. 6 Class A interest. 7 Class B interest 8 Pro rata or sequential principal (depending on a sequential order event(i)). 9 Principal to noteholders pro rata (assuming no sequential order event(i) and no rapid amortization). 10 The amount needed, if any, to achieve the required amount in the reserve account. 11 Class A and B deferred interest amounts(ii), sequentially. 12 Any other amounts due to the indenture trustee and backup servicer, pro rata. 13 Any other amounts due to the custodian. 14 Any other amounts due to the owner trustee. 15 Any other amounts due to the administrator. 16 Pay the owner trustee for distribution to the depositor or any subsequent certificate holders. (i)see the Credit Support section below for more information on the sequential order event. (ii)deferred interest amounts are interest payments on the note balance excess over the aggregate loan balance, if any. FEBRUARY 17,

4 Collateral The pool's loans must satisfy various eligibility criteria, including: A minimum of one payment before the cut-off date must be made; Payments must be made in U.S. dollars; No adverse selection procedures were used in selecting the timeshare loan; and The loans cannot be delinquent for more than 30 days. We compared this transaction's pool characteristics with those of prior deals from HGV, as well as to several recent transactions (see table 2A and 2B). Table 2A Statistical Portfolio Characteristics Hilton 2017-A(i) Hilton 2014-A Hilton 2013-A Aggregate loan balance ($) 357,144, ,142, ,106,046 No. of loans 16,181 18,765 13,229 Range of loan balances ($) ,631 1, ,949 2, ,313 Avg. loan balance ($) 22,072 19,032 19,284 Range of coupon rates (%) Weighted avg. coupon rate (%) Range of original terms (mos.) Weighted avg. original term (mos.) Range of remaining terms (mos.) Weighted avg. remaining term (mos.) Range of seasoning (mos.) Weighted avg. seasoning (mos.) Range of FICO scores Weighted avg. FICO score Weighted avg. down payment/original equity (%) Foreign/U.S. (%) 13.7/ / / Closing date Mar-17 6/18/2014 8/8/2013 (i)as of the Jan 31, 2017, cutoff date. Hilton 2017-A--Hilton Grand Vacations Trust 2017-A. Hilton 2014-A--Hilton Grand Vacations Trust 2014-A. Hilton 2013-A--Hilton Grand Vacations Trust 2013-A. Table 2B Statistical Portfolio Characteristics Aggregate loan balance ($) Hilton 2017-A(i) (ii) Diamond (ii) MVW (ii) Diamond (ii) Welk 2015-A(ii) 357,144, ,115, ,506, ,868, ,083, ,086,649 No. of loans 16,181 15,653 5,988 11,133 7,160 5,985 Range of loan balances ($) , , ,471 1, , , ,661 Avg. loan balance ($) 22,072 23,070 25,469 18,582 24,732 18,227 Range of coupon rates (%) FEBRUARY 17,

5 Table 2B Statistical Portfolio Characteristics (cont.) Weighted avg. coupon rate (%) Range of original terms (mos.) Weighted avg. original term (mos.) Range of remaining terms (mos.) Weighted avg. remaining term (mos.) Range of seasoning (mos.) Weighted avg. seasoning (mos.) Range of current FICO scores Weighted avg. current FICO score Weighted avg. down payment/original equity (%) Foreign/U.S. (%) 13.73/ / / / / /98.90 Closing date Mar-17 Oct-16 Nov-15 Aug-16 Jul-15 Jun-15 Aggregate loan balance ($) Bluegreen 2015-A(ii) Gold Key 2014-A(ii) Diamond (ii) MVW (ii) Silverleaf 2014-A(ii) 103,746, ,950, ,833, ,443, ,377,358 No. of loans 12,077 10,509 8,463 13,831 10,093 Range of loan balances ($) 1,002-71, , , ,885 1,609-80,375 Avg. loan balance ($) 8,590 13,793 19,713 14,781 13,116 Range of coupon rates (%) Weighted avg. coupon rate (%) Range of original terms (mos.) Weighted avg. original term (mos.) Range of remaining terms (mos.) Weighted avg. remaining term (mos.) Range of seasoning (mos.) Weighted avg. seasoning (mos.) Range of current FICO scores Weighted avg. current FICO score Weighted avg. down payment/original equity (%) FEBRUARY 17,

6 Table 2B Statistical Portfolio Characteristics (cont.) Foreign/U.S. (%) 2.00/ / / / Closing date Jan-15 Nov-14 Nov-14 Jul-15 Oct-14 (i)as of Jan 31, 2017, 2016 cutoff date. (ii)as of the statistical cutoff date. Hilton 2017-A--Hilton Grand Vacations Trust 2017-A Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Diamond Diamond Resorts Owner Trust Welk 2015-A--Welk Resorts 2015-A LLC. Bluegreen 2015-A--BXG Receivables Note Trust 2015-A. Gold Key 2014-A--Gold Key Resorts 2014-A LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Silverleaf 2014-A--Silverleaf Finance XVIII LLC. S&P Global Ratings' Expected Gross Default Assumption: 8.3% Beginning with fourth-quarter 2012 transactions, we no longer reforecast collateral defaults based on incremental static pool performance within one year, unless justified by any unforeseen events that cause meaningful shifts in collateral performance. For issuers who issue multiple transactions per year, our current approach means that within any given year, differences in default levels from one transaction to the next are entirely attributable to collateral pool composition, including the FICO distribution and loan seasoning, among other factors. We instituted this change so market participants can compare collateral pool composition and its effect on the default assumptions used in our cash flow analysis within a calendar year. To derive the base-case gross default rate for the 2017-A transaction, we examined the historical gross default performance of HRC's static loan pools from 2002 through 2014 on both the aggregate and subpool levels. We broke down the data by the following FICO score ranges (based on the origination year for those years in which performance data by FICO score is available): ; ; ; ; ; ; ; 775 and higher; Japan; U.S. no FICO; and Foreign (excluding Japan). HRC's first-quarter 2002 through third-quarter 2008 vintages had less than approximately 5.0% of their original aggregate loan balances outstanding. We used the loan balance data from these vintages to construct an aggregate default timing curve and a default curve for each FICO score category. Then we estimated the expected defaults for each FICO score category subpool for the remaining 2008 through fourth-quarter 2014 static pool vintages using the actual cumulative default data to date and the applicable default timing curve to form an expected default rate assumption for the pool. FEBRUARY 17,

7 For example, we reviewed the actual cumulative gross default rate for the HRC loans that were originated from first-quarter 2002 to third-quarter 2008 to borrowers with FICO scores in the range and the actual cumulative default rate to date for the loans that were originated in fourth-quarter 2008 to borrowers in the same FICO score range (the fourth-quarter FICO category; see chart 1). Assuming the cumulative defaults of the loans originated in first-quarter 2010 in the FICO category follow a similar timing pattern to those from the average pools in first-quarter 2002 to third-quarter 2008 in the FICO category, our expected gross default rate for the first-quarter FICO category is approximately 27.21% (see chart 1). Chart 1 We repeated the aforementioned process for each quarterly FICO vintage in the static pool vintages to derive an expected cumulative gross default rate for each FICO category. The gross default performance data by FICO category are not available for static pools originated before 2002; therefore, the data we were provided represent loan performance in a relatively positive macroeconomic environment and may not fully represent the base-case gross defaults across multiple business cycles. We also considered a portion of the pool that was more highly seasoned and analyzed the loss progression that we would expect in the historical static pool data throughout the remaining months. FEBRUARY 17,

8 Based on this analysis and the loan pool's credit score distribution, we expect the pool to experience a 8.3% cumulative gross default rate as a base case. Stressed Expected Gross Default Assumptions ('AA (sf)' and 'A (sf)'): 28.7% and 22.7% We used a multiple of our expected base-gross default rate assumption to determine our expected stressed cumulative gross default rate assumption for each rating scenario. For instance, our expected cumulative gross default for a 'AA (sf)' rating would typically be 3.25x-3.75x our expected base-case cumulative gross default rate assumption, and a 'A (sf)' rating would typically be 2.50x-3.00x. Therefore, we expect, under certain default and timing scenarios, that the series 2017-A transaction could experience a gross default rate as high as 28.7% under a 'AA' scenario and 22.7% under an 'A' scenario. In the series 2017-A transaction, we believe that, depending on the default timing and voluntary prepayment rate assumptions, the cumulative gross default rate that the notes would be able to withstand ranges from 32.0%-39.3% under 'AA' stresses and ranges from 24.00%-27.25% under 'A' stresses. We determined these rates after considering that the transaction has to pay full and timely interest and ultimate principal payments on the rated notes (see the Cash Flow Assumptions And Sensitivity Analysis section below for the different scenarios we reviewed). In our analysis, we did not assume any recovery on the loans. If the cumulative default percentage rises higher than the assumed stressed expected gross default assumption, or if the loans' prepayment rate or the timing of their default is different than what we have assumed in our analysis, the series 2017-A notes may experience an interest or principal payment default. High-Balance Loans Approximately 28.5% of the pool comprises loans with an original loan balance greater than $50,000 and approximately 15.0% greater than $75,000. We believe higher-balance loans have exhibited an increased propensity to default, which we also considered in our analysis. Credit Support Credit support for the notes is provided by: The class B notes' 16.50% subordination for the class A notes' benefit; The initial 2.00% overcollateralization; A reserve account with an initial funded balance equal to 1.25% of the initial collateral balance; The excess spread, which initially may be approximately 7.85% per year; and Performance-based triggers that, if breached, would cause the class A and B note principal to be paid sequentially or all available funds to be allocated to pay down the debt. The sequential principal payments may occur if there is a sequential order event, which includes, among other triggers, the average default rate for the previous three months exceeds 1.15%, the overcollateralization amount drops below its required amount for two consecutive periods after the payment date in Oct. 2017, or the cumulative default rate exceeds 12.5%. All available funds may be allocated to pay down the debt if there is a rapid amortization event, which occurs when the average of the delinquency ratio for FEBRUARY 17,

9 the previous three months exceeds 4.5%, the average default rate for the previous three months exceeds 1.00%, average recoveries over three payment periods fall below 25%, an event of default occurs, or a servicer termination event has occurs. Cash Flow Assumptions And Sensitivity Analysis According to our criteria for rating timeshare loan securitizations, we ran various cash flow scenarios to determine the appropriate preliminary ratings for the series 2017-A notes, given the transaction's credit enhancement, and to test the transaction's sensitivity to changes in default timing and different voluntary prepayment assumptions (see "Rating Criteria For U.S. Timeshare Loan Securitizations," published Oct. 8, 2003). Our expected gross default assumption and default timing patterns are applied in aggregate to the collateral pool. Our methodology distributes defaults among the collateral in order to match our aggregated gross default assumptions and default timing patterns as closely as possible. Depending on how the collateral pool is represented, some collateral groups may experience higher or lower defaults depending on their seasoning. We ran several gross default rate timing curves to test the transaction under stressed gross default rate assumptions applied under different timing scenarios (see table 3). We ran each default timing scenario (or curve) under various voluntary prepayment assumptions. Table 3 Gross Default Timing Curves For Cash Flow Modeling (%) Year A B C D E F G H I S1 S % Break-even gross defaults We also determined what we believe to be the break-even gross default levels for each scenario (see table 4). All of the scenarios we ran under a 10% constant prepayment rate voluntary prepayment assumption have a break-even default level that is above 28.7% and 22.7% (the 'AA' and 'A' default assumptions). Table 4 Break-Even Gross Defaults Assuming 10% CPR (%) Pattern Class A notes Class B notes Curve A Curve B Curve C FEBRUARY 17,

10 Table 4 Break-Even Gross Defaults Assuming 10% CPR (%) (cont.) Pattern Class A notes Class B notes Curve D Curve E Curve F Curve G Curve H Curve I Curve S Curve S CPR--Constant prepayment rate. Under each of the simulated default scenarios and prepayment assumptions, the cash flow modeling exercise suggests that noteholders will be paid timely interest and ultimate principal even if the series 2017-A loan pool's cumulative defaults increase to the levels listed in table 4. Recovery Rate Trigger Similar to some other recent timeshare transactions, the series 2017-A transaction includes a recovery rate trigger in the payment waterfall. Under our current default timing assumptions and cash flow modeling, we typically assume zero recovery for defaulted timeshare loans. In our view, timeshare loan recovery levels and timing are subject to several variables, such as whether the developer has an active sales channel to remarket the defaulted loans and developer discretion with respect to the resale timing. When modeling the recovery rate trigger, we believe the break-even default levels may be inflated because we assume zero recoveries. As a result, the recovery rate trigger test will fail immediately, and the transaction will begin making turbo payments to the rated notes. Therefore, a transaction with this trigger appears to be able to withstand higher default stress scenarios than one without the trigger. Furthermore, transactions structured with this type of trigger may have classes that appear marginally weaker than those without the trigger (or that are excluded from the cash flow modeling) under our current default timing assumptions and cash flow modeling. In addition to our customary default stress scenarios, we ran other stress scenarios and sensitivity analyses. In April 2011, we introduced additional default timing patterns to address the effect of this trigger type. For timeshare securitization transactions that include a recovery ratio trigger, we examine additional sensitivity patterns to determine if the full and timely interest and principal payments to the noteholders would be affected. To simulate a scenario in which there is a period of time before the onset of a representative rating-level stress environment, we developed a revised set of default patterns that delay the stress by one year (delayed onset). In year one, we modeled base-case defaults derived by taking the product of the base-case cumulative gross loss assumption on the collateral pool and the year-one defaults under the developer-specific loss curve (see curve S2 in table 3 above) and adjusted for the stressed expected gross default assumption for that class. During the first 12 months only, we FEBRUARY 17,

11 modeled recoveries at a level slightly above that which would breach the recovery rate trigger. Based on this scenario for the first year, we developed the revised sensitivity default patterns shown in table 5. Table 5 Revised Sensitivity Default Patterns 'AA' rating (%) Year A B C D E F G H I S1 S 'A' rating (%) Year A B C D E F G H I S1 S In multiclass transactions, we observed that the proportion of stressed defaults allocated to year one for the classes increases as we examined classes further down in the capital structure. This suggests that these structures should be able to withstand a greater proportion of losses at the higher rating levels once the stresses begin after the first year. In addition, we modeled the transaction without the recovery ratio trigger. Consistent with previous transactions in determining the applicable rating, we looked at the maximum break-even for each default pattern under both the delayed onset scenario and the no recovery rate trigger scenario. Depending on qualitative factors, including the collateral characteristics, among others, for some collateral pools we may not require a transaction to pass all default patterns under the sensitivity at a given rating level. Under these stress assumptions and sensitivity scenarios that, in our opinion, are commensurate with the assigned preliminary ratings, we expect the series 2017-A transaction's cash flows to be sufficient to pay full and timely interest FEBRUARY 17,

12 and ultimate principal on the notes. We believe that the aforementioned additional sensitivity analysis that we performed on the series 2017-A notes is sufficient to address the recovery trigger's effect on the cash flow results. We compared this transaction's credit and cash flow characteristics with those of several recent transactions, including base-case cumulative gross default assumptions (see table 6), observed cushion for the break-even gross default levels over the stressed expected gross default assumptions for each rating level (see table 7), and observed cushion for the break-even gross default levels in our sensitivity runs pertaining to the recovery rate trigger over the stressed expected gross default assumptions for each rating level (see table 6). Table 6 Base-Case Default Assumptions And Advance Rates Base-case default assumption(%) Hilton 2017-A Diamond MVW Diamond Welk 2015-A Base-case default assumption(%) Bluegreen 2015-A Hilton 2014-A Gold Key 2014-A Diamond MVW Silverleaf 2014-A Advance rate (%) AA Advance rate (%) AA AA A A A BBB BBB BBB- BB AA- A+ A A BBB+ BBB BBB BB Hilton 2017-A--Hilton Grand Vacations Trust 2017-A Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. MVW MVW Owner Trust Diamond Diamond Resorts Owner Trust Timeshare Receivables Funding LLC. Welk 2015-A--Welk Resorts 2015-A LLC Timeshare Receivables Funding LLC. Bluegreen 2015-A--BXG Receivables Note Trust 2015-A. Hilton 2014-A--Hilton Grand Vacations Trust 2014-A. Gold Key 2014-A--Gold Key Resorts 2014-A LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Timeshare Receivables Funding LLC. Silverleaf 2014-A -- Silverleaf Finance XVIII, LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. FEBRUARY 17,

13 In table 7, we indicate the average range of the observed cushions for the break-even gross default levels in each default timing curve over the stressed expected gross default assumptions for each rating level, as well as the minimum observed cushions. For example, for the class A notes in the series 2017-A transaction, the average cushion for break-even default levels over the 28.7% stressed expected gross default assumption at the 'AA' level is greater than, and the minimum cushion is between 2.00%-. Table 7 Standard Default Patterns: Average/minimum Cushion Recovery rate trigger? Hilton 2017-A Diamond Yes Yes Yes Yes Yes Yes Senior class Average Average/minimum Average 2.00%-4.99% Minimum Average Average/minimum Minimum Average 1.00%-1.99% Minimum -0.99% Minimum Junior class Average Average 2.00%-4.99% Average/minimum Average Average Minimum Minimum Average 1.00%-1.99% Minimum Minimum -0.99% Minimum Recovery rate trigger? Diamond Welk 2015-A Bluegreen 2015-A Hilton 2014-A Yes Yes Yes Yes Yes Yes Senior class Average Average 2.00%-4.99% Average Minimum Average Average/minimum Minimum 1.00%-1.99% Average -0.99% Minimum Minimum Junior class Minimum 2.00%-4.99% Average Average Average Average Average Average/minimum 1.00%-1.99% Minimum Minimum -0.99% Minimum Minimum Minimum FEBRUARY 17,

14 Table 7 Standard Default Patterns: Average/minimum Cushion (cont.) Recovery rate trigger? Gold Key 2014-A Diamond Yes Yes Yes Yes Yes Senior class Average 2.00%-4.99% Average/minimum Minimum Average/minimum Average/minimum 1.00%-1.99% Average -0.99% Junior class Minimum 2.00%-4.99% Average Average/minimum Average Average 1.00%-1.99% Average Minimum Minimum -0.99% Minimum Minimum Subordinate class 2.00%-4.99% Average 1.00%-1.99% -0.99% Hilton 2017-A--Hilton Grand Vacations Trust 2017-A Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Diamond Diamond Resorts Owner Trust Timeshare Receivables Funding LLC. Welk 2015-A--Welk Resorts 2015-A LLC Timeshare Receivables Funding LLC. Bluegreen 2015-A--BXG Receivables Note Trust 2015-A. Hilton 2014-A--Hilton Grand Vacations Trust 2014-A. Gold Key 2014-A--Gold Key Resorts 2014-A LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Timeshare Receivables Funding LLC. Silverleaf 2014-A -- Silverleaf Finance XVIII LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. We reviewed the maximum break-even level as a sensitivity for each default pattern under both the delayed onset scenario and the no recovery rate trigger scenario. In table 8, we indicate the range in which we observed the average and the minimum observed cushions of the maximum break-even for each of these two sensitivity scenarios for the two most-senior classes. For example, for the series 2017-A transaction's class B notes, the average cushion for the maximum break-even sensitivity default levels over the 22.7% stressed expected gross default assumption at the 'A' level is between 2.00%-, and the minimum cushion is between 2.00%-. FEBRUARY 17,

15 Table 8 Recovery Rate Trigger Sensitivity: Average/Minimum Cushion Recovery rate trigger? Hilton 2017-A Yes Yes Yes Yes Yes Yes Diamond Senior class Average Average 2.00%-4.99% Minimum Average Average/minimum Average 1.00%-1.99% Average -0.99% Minimum Junior class Minimum Minimum Minimum 2.00%-4.99% Average/minimum Average Average Average Average 1.00%-1.99% Average Minimum Minimum -0.99% Minimum Minimum Minimum Recovery rate trigger? Diamond Welk 2015-A Bluegreen 2015-A Yes Yes Yes Yes Yes Yes Hilton 2014-A Senior class 2.00%-4.99% Average 1.00%-1.99% Average Average -0.99% Average Junior class Average Minimum Minimum Minimum Minimum Average/minimum Minimum 2.00%-4.99% Average Average Average Average 1.00%-1.99% Average Minimum -0.99% Minimum Minimum Minimum Minimum Average/minimum Recovery rate trigger? Gold Key 2014-A Diamond Yes Yes Yes Yes FEBRUARY 17,

16 Table 8 Recovery Rate Trigger Sensitivity: Average/Minimum Cushion Senior class Yes (cont.) 2.00%-4.99% Average Average Average 1.00%-1.99% Average Minimum -0.99% Junior class Minimum Minimum Average/minimum Minimum 2.00%-4.99% Average Average Average 1.00%-1.99% Minimum Average Average -0.99% Subordinate class Minimum Minimum Minimum Minimum 2.00%-4.99% Average/minimum 1.00%-1.99% -0.99% Hilton 2017-A--Hilton Grand Vacations Trust 2017-A Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. Diamond Diamond Resorts Owner Trust Diamond Diamond Resorts Owner Trust Timeshare Receivables Funding LLC. Welk 2015-A--Welk Resorts 2015-A LLC Timeshare Receivables Funding LLC. Bluegreen 2015-A--BXG Receivables Note Trust 2015-A. Hilton 2014-A--Hilton Grand Vacations Trust 2014-A. Gold Key 2014-A--Gold Key Resorts 2014-A LLC. Diamond Diamond Resorts Owner Trust MVW MVW Owner Trust Timeshare Receivables Funding LLC. Silverleaf 2014-A -- Silverleaf Finance XVIII LLC Timeshare Receivables Funding LLC Timeshare Receivables Funding LLC. Property Review During our review of the series 2017-A transaction, S&P Global Ratings toured the Hilton Grand Vacations Club at Parc Soleil, in Orlando, Fla. (see charts 2-8). The property at Parc Soleil has 400 units, comprising studios and one- and two-bedroom units. The property has various amenities, including pools, a game room, a children's play area, as well as a lounge, restaurant, fitness center, and a marketplace. All units, including the studio have a sitting area, kitchenette, flat-screen TV, and DVD player. The one- and two-bedroom units have a full kitchen, separate shower and tub, washer and dryer, and a balcony in the unit. FEBRUARY 17,

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23 Of the two sales centers HGV has in Orlando, Parc Soleil is the largest. The sales center at Parc Soleil has approximately 160 employees serving both existing members and new prospects. Legal Review/Structure The issuer acquires loans that HRC or an affiliate originates. The loans are either secured by a deed of trust or mortgage in timeshare properties that a borrower purchased. HRC sells all the loans it acquires to HGV Depositor LLC, the depositor. For this transaction, the depositor will sell a portfolio of loans it acquired from HRC to the issuer. The portfolio will then be pledged to the indenture trustee and serve as the collateral for the notes issued in this transaction. The issuer will fund the purchase from the depositor by distributing the notes and beneficial interest in the issuer to the depositor. In turn, the depositor will sell the notes and use the proceeds to purchase the loans from HRC. All the transactions described above are expected to occur FEBRUARY 17,

24 simultaneously at closing. The depositor is a wholly owned subsidiary of HRC and is intended to be structured as a bankruptcy-remote, special-purpose entity (SPE). The issuer's SPE provisions are expected to be consistent with S&P Global Ratings' bankruptcy-remoteness criteria. In rating this transaction, S&P Global Ratings will review the legal matters that it believes are relevant to its analysis, as outlined in its criteria. Related Criteria And Research Related Criteria Criteria - Structured Finance - General: Ratings Above The Sovereign - Structured Finance: Methodology And Assumptions, Aug. 8, 2016 Legal Criteria: Asset Isolation And Special-Purpose Entity Criteria--Structured Finance, May 7, 2013 General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012 Legal Criteria: Legal Criteria For U.S. Structured Finance Transactions: Special-Purpose Entities, Oct. 1, 2006 Criteria - Structured Finance - ABS: Rating Criteria for U.S. Timeshare Loan Securitizations, Oct. 8, 2003 Related Research Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016 In addition to the criteria specific to this type of security (listed above), the following criteria articles, which are generally applicable to all ratings, may have affected this rating action: "Post-Default Ratings Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?," March 23, 2015; "Global Framework For Assessing Operational Risk In Structured Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments: Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013; "Counterparty Risk Framework Methodology And Assumptions," June 25, 2013; "Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1, 2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of CreditWatch And Outlooks," Sept. 14, Analytical Team Primary Credit Analysts: Jay Srivats, San Francisco (1) ; jay.srivats@spglobal.com Yalan Tao, New York ; yalan.tao@spglobal.com Secondary Contact: Deborah L Newman, New York (1) ; deborah.newman@spglobal.com Analytical Manager: Kate R Scanlin, New York (1) ; kate.scanlin@spglobal.com Legal Contact: Michael A Stevens, New York ; michael.stevens@spglobal.com FEBRUARY 17,

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